3 ms·

One thing he didn't talk about was capital gains tax. If I wanted to bet on the election, I would first have to realize my short term capital gains.

ahnick 6y ago
He avoids capital gains in the article by using a MakerDAO CDP. This is a loan that is collateralized by his Ethereum holdings. (IIRC 1.5 ETH to the amount of DAI you want)
- mannykannot 6y ago
  Indeed, though at 3:2 you are apparently at considerable risk of the loan being called by anyone (with no margin call beforehand): If the value of the ETH collateral that you deposited drops to less than 150% the value of the DAI you withdrew, anyone can come in and "liquidate" the vault, forcibly selling the ETH to buy back the DAI and charging you a high penalty. Hence, it's a good idea to have a high collateralization ratio in case of sudden price movements; I had over $3 worth of ETH in my CDP for every $1 that I withdrew.
  - as300 6y ago
    While this is true, you could easily write a listener script (very easy with ETH due to the extensive bloom filter use) that adds more collateral to your position if it reaches, say, within %175 of the capital you withdrew.
    - Sargos 6y ago
      DeFi Saver does this and has a large userbase. https://defisaver.com/ https://defisaver.com/
tantalor 6y ago
Prediction market positions are not capital gains in the same way that lottery tickets are not capital gains. It is gambling.
- rspeele 6y ago
  Yeah, my PredictIt winnings (also from betting against Trump after Trump lost) are on a 1099-MISC as "Other Income", which I believe is what gambling would be. Still, the point stands that gambling sucks since not only are you likely to lose more often than you win after fees, but taxes eat your winnings too! But then again, it's hardly gambling when you are betting against Q. Hilariously, on PredictIt you could see the market inefficiency in action as the site has a cap of $850 risked per bet, but after the election you could make essentially the same bet a dozen different ways. Which party will win? Which candidate will win? Will the winning candidate also win the popular vote? What will be the electoral college margin of victory? Will a woman be elected VP in 2020? Of all those different ways to make the Trump/Biden bet, the most straightforward ones like "which party wins the 2020 election" had the highest Trump prices, while the less prominent markets like "Will the SC Dem Primary winner win the general election?" had lower Trump prices. Now, why would I and other gamblers not sell my bets from the expensive 88c "SC Dem Primary Winner" market, and move the money into the cheaper 84c "Which party wins" market? Why would the prices not equalize since they are, at this point, bets on the same outcome? Because I'm already at the $850 cap in the "Which party wins" market. I can't put more in. Or, if I wasn't betting on that before the election, I might not even be able to because PredictIt also caps each market at 5,000 total traders. In other words, the more obvious markets filled up to their limits earlier in the process and had their price influenced more by people who thought Trump would win, and had less price movement after that due to the distribution of traders already locked into the market. The obscure markets were low-volume before the election, but filled up after-the-fact with people like me eager to find "free money" bets, so the price on the Biden side ended up a few cents higher.
- jldugger 6y ago
  But your source of funds might be. Sounds like the OP avoided this by borrowing against assets, but since his assets are volatile blockchain stuff, the interest rate was absurd.
  - ahnick 6y ago
    The interest rate on the loan was 3.5%. Long term capital gains in the US are typically 15% (short term 30%), so using a CDP can save a lot of money depending on the tax laws that apply to you.

ahnick 6y ago

He avoids capital gains in the article by using a MakerDAO CDP. This is a loan that is collateralized by his Ethereum holdings. (IIRC 1.5 ETH to the amount of DAI you want)

mannykannot 6y ago
Indeed, though at 3:2 you are apparently at considerable risk of the loan being called by anyone (with no margin call beforehand): If the value of the ETH collateral that you deposited drops to less than 150% the value of the DAI you withdrew, anyone can come in and "liquidate" the vault, forcibly selling the ETH to buy back the DAI and charging you a high penalty. Hence, it's a good idea to have a high collateralization ratio in case of sudden price movements; I had over $3 worth of ETH in my CDP for every $1 that I withdrew.
- as300 6y ago
  While this is true, you could easily write a listener script (very easy with ETH due to the extensive bloom filter use) that adds more collateral to your position if it reaches, say, within %175 of the capital you withdrew.
  - Sargos 6y ago
    DeFi Saver does this and has a large userbase. https://defisaver.com/ https://defisaver.com/

tantalor 6y ago

Prediction market positions are not capital gains in the same way that lottery tickets are not capital gains. It is gambling.

rspeele 6y ago
Yeah, my PredictIt winnings (also from betting against Trump after Trump lost) are on a 1099-MISC as "Other Income", which I believe is what gambling would be. Still, the point stands that gambling sucks since not only are you likely to lose more often than you win after fees, but taxes eat your winnings too! But then again, it's hardly gambling when you are betting against Q. Hilariously, on PredictIt you could see the market inefficiency in action as the site has a cap of $850 risked per bet, but after the election you could make essentially the same bet a dozen different ways. Which party will win? Which candidate will win? Will the winning candidate also win the popular vote? What will be the electoral college margin of victory? Will a woman be elected VP in 2020? Of all those different ways to make the Trump/Biden bet, the most straightforward ones like "which party wins the 2020 election" had the highest Trump prices, while the less prominent markets like "Will the SC Dem Primary winner win the general election?" had lower Trump prices. Now, why would I and other gamblers not sell my bets from the expensive 88c "SC Dem Primary Winner" market, and move the money into the cheaper 84c "Which party wins" market? Why would the prices not equalize since they are, at this point, bets on the same outcome? Because I'm already at the $850 cap in the "Which party wins" market. I can't put more in. Or, if I wasn't betting on that before the election, I might not even be able to because PredictIt also caps each market at 5,000 total traders. In other words, the more obvious markets filled up to their limits earlier in the process and had their price influenced more by people who thought Trump would win, and had less price movement after that due to the distribution of traders already locked into the market. The obscure markets were low-volume before the election, but filled up after-the-fact with people like me eager to find "free money" bets, so the price on the Biden side ended up a few cents higher.
jldugger 6y ago
But your source of funds might be. Sounds like the OP avoided this by borrowing against assets, but since his assets are volatile blockchain stuff, the interest rate was absurd.
- ahnick 6y ago
  The interest rate on the loan was 3.5%. Long term capital gains in the US are typically 15% (short term 30%), so using a CDP can save a lot of money depending on the tax laws that apply to you.