Tax practitioners advising clients in two fast-growing markets, student-athlete compensation and prediction-market trading, should build disciplined records because economic activity has outrun tax guidance, panelists said at an American Bar Association Section of Taxation virtual panel October 6.
The session split evenly between name, image, and likeness (NIL) income and prediction-market event contracts. Moderator Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University, described a largely unmeasured NIL market of small-dollar, many-payer athletes.
No paper trail for NIL income
Frank Agostino of Kostelanetz LLP and the Taxpayer Assistance Corporation said the usual intake routine fails because athletes rarely bring complete paperwork. Many receive no Form 1099 or Form W-2, and payments move through Zelle, Venmo, Cash App, and sometimes cash or cryptocurrency, with non-cash benefits such as the use of a car often leaving no trail.
Derek Ganter, director of stakeholder liaison and IRS communications and the parent of an athlete earning NIL income, said the culture resists advisers. “Nobody wants to mess with the golden goose,” he said, speaking in his personal capacity, and described reconstructing his son’s income each year from payment apps and social media.
Sarah Green, a senior associate at Dentons, agreed that practitioners must first build trust, then rebuild income from bank, payment-app, and social media records. A client’s feed “will not lie,” she said, because athletes tend to post gifts and benefits as they receive them. All three urged contemporaneous ledgers.
Valuation, forms, and worker status
Non-cash benefits enter income at fair market value under IRC § 61, and Green said valuing them is a recurring problem because reliable forms seldom exist. Ganter added that athletes often overlook estimated taxes.
When a payer issues no form, or one that overstates or understates a deal, Agostino said practitioners cannot report an incorrect figure under Circular 230 and should use established procedures to contest an erroneous Form 1099 or Form W-2. Because the IRS matches information returns, he said, a mismatch draws an automated notice. He called the collectives that pay athletes “the Dodge City of tax compliance” and said some use agreements to shift employment tax and benefit obligations off school books.
On worker classification, the panelists differed in emphasis. Bruckner noted the Senate had passed the Protect College Sports Act of 2026 without resolving the question. Green called status “a facts and circumstances evaluation.” Agostino was more categorical: “There is no realistic possibility of success if a traditional analysis is applied to the school-student athlete relationship,” he said. Ganter said schools script athletes’ days “from the time they wake up to the time they go to bed.”
Prediction markets resist one tax label
Adam Robbins, senior vice president of tax and tax counsel at bet365, described event contracts as binary, all-or-nothing instruments under the Commodity Exchange Act. A contract’s status as a prediction market is not decisive for tax purposes, he said; what matters is the right the participant acquired and the nature of the activity.
Robert Stoddard, lead U.S. tax partner for KPMG’s gaming practice, said such contracts grew sharply after a 2025 Commodity Futures Trading Commission rule change lifted prohibitions on many event contracts. Participation now skews younger and toward states without regulated online sports betting, he said. Robbins said recent figures suggest Texas and California alone account for up to 40% of sports event contract volume, part of a market Bruckner put at roughly $40 billion in monthly trading.
Both said pending litigation, including a circuit split and a certiorari petition from New Jersey, will not settle the tax questions, because the federal regulatory classification does not control treatment under the Internal Revenue Code.
Loss limits, statute of limitations, and records
Absent guidance from the IRS, Stoddard said, the “collective view” is that the contracts are unlikely to qualify as IRC § 1256 instruments, which carry favorable 60/40 capital gains treatment, because most lack daily mark-to-market margining and a clear underlying asset. That leaves short-term capital gain, wagering, or hobby treatment, and he said taxpayers are taking different positions, some reporting wagering income to align with the state-law arguments.
If the contracts are wagering, Robbins said, IRC § 165(d) allows only 90% of wagering losses beginning in 2026, with deductible losses capped at gains, so a net loser can owe tax. Taxpayers who claim the standard deduction and have winnings are most exposed, Stoddard said, because that income is “essentially naked.” Robbins warned that a capital position later recharacterized could trigger the six-year statute of limitations by understating adjusted gross income.
Reporting remains inconsistent, Stoddard said, with some platforms issuing a Form 1099-B, others a Form 1099-MISC, and others nothing. “All income is taxable income from dollar one,” he said, echoing the NIL discussion, while Robbins called the work “an exercise in record keeping.” Bruckner said some lawmakers and tax staff want to revisit the wagering-loss limitation, though she cautioned a fix is not guaranteed.
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