What Is the Risk of Having Different Tax Characterizations for the Underlying Crypto and the Derivative?

The risk is a mismatch in tax treatment. For example, a crypto derivative might be Section 1256 (60/40) while the underlying crypto is taxed based on its holding period (short-term/long-term).

This can lead to a situation where a hedge is taxed unfavorably compared to the position it is hedging, resulting in an unexpected tax bill despite a hedged net financial result.