How Is the “Mark-to-Market” Rule Applied to Cryptocurrency Futures for Tax Purposes?

The mark-to-market rule under Section 1256 requires traders to treat all open contracts as if they were sold at fair market value on the last day of the tax year. Any resulting gain or loss is realized for that year, even if the contract has not yet been closed or expired.

This prevents tax deferral. For regulated crypto futures, this gain/loss is then subject to the 60/40 capital gains split.

This is generally simpler than tracking every trade's holding period.