Equity Perps Tax Guide: IRS 2026
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On-chain equity perps are one of the fastest-growing corners of DeFi: leveraged contracts that track the price of stocks like Nvidia, Tesla, and Apple, traded 24/7 on venues that generally send no tax form to the IRS. I'm Chris Herbst, Managing Director at CountDeFi, a global crypto tax reporting firm specializing in complex DeFi reconciliations, and I hold the GTP designation and CIBA membership.
This guide is for US investors trading on-chain equity perps on Hyperliquid, Ondo, Kraken's xStocks Perp, and similar venues, where reporting complexity climbs sharply once funding, liquidations, and multiple venues enter the picture. I'll walk through what triggers tax, the character question the IRS has left open, and the traps that turn a no-form venue into a filing problem.
Are On-Chain Equity Perps Taxed?
Yes, on-chain equity perp activity is generally taxable for US filers. Closing an equity perp position that produces a realized gain or loss is generally a taxable event, even when the venue issues no tax form, even when it settles in USDC rather than US dollars, and even when you accessed it from outside the US.
Two facts sit behind everything else in this guide, and they matter more than any framework choice:
- on-chain equity perp venues generally do not issue Forms 1099-DA or report customer trading activity to the IRS, so you self-report your taxable events from reconstructed on-chain data
- US persons owe US tax on worldwide income regardless of how they accessed the venue, including through a VPN
What Is Generally Taxable On An Equity Perp
Three categories of on-chain equity perp activity are generally taxable for US filers:
- closing an equity perp position, at a profit or a loss, is generally a reportable event at the close
- a liquidation of an equity perp position is a forced close and generally a reportable event
- acquiring, disposing of, or exchanging the USDC used to fund an on-chain equity perp venue can create taxable events, because the IRS treats digital assets as property under IRS Notice 2014-21; simply transferring USDC between wallets or accounts you own generally does not
The lead-in below shows how each core on-chain equity perp action is generally treated under current IRS rules:
The base US crypto tax framework that sits behind all of this is covered in my guide on where US crypto tax enforcement now stands.
What Is An On-Chain Equity Perp?
An on-chain equity perp is a perpetual futures contract that tracks the price of a stock or ETF, trades with leverage on a decentralized venue, and never expires. No real shares change hands. The trader posts margin, opens a contract that follows the reference price, and a funding-rate mechanism keeps the contract tethered to that price.
How Does An Equity Perp Work?
An on-chain equity perp tracks a reference price for the underlying stock, with no expiry date and leverage often up to 20x. Because there is no expiry, the contract uses periodic funding payments exchanged between longs and shorts to stay aligned with the reference price. The important tax feature is what the contract does not include: an on-chain equity perp confers no share ownership, no voting rights, and no cash dividends. It is a leveraged bet on price, not a claim on the company.
Why Equity Perps Have Grown So Quickly
On-chain equity perps have surged because they solve a specific problem: leveraged, 24/7 stock exposure without a brokerage account or market hours. Reported launch volumes and open interest on early equity perp products have run into the tens and hundreds of millions of dollars, and industry analysts frame equity perps as competing less with stock futures and more with the leveraged short-term options trade, which is a large market. The growth has run years ahead of any IRS guidance, and closing that gap falls on the trader.
What Are The On-Chain Equity Perp Venues?
The on-chain equity perp venues active in 2026 share a defining tax feature: they are decentralized, non-custodial, and issue no US tax forms. The other feature that drives the US analysis is access, because most equity perp venues currently exclude US persons.
The table below summarizes the major on-chain equity perp venues in mid-2026 and what matters for a US filer:
The access restriction does not remove the tax obligation. A US person who trades an equity perp on a non-US venue still owes US tax on the result, which is the point most misread.
How Are On-Chain Equity Perps Taxed?
On-chain equity perp gains are taxed under one of 2 frameworks for US filers, and the IRS has not picked between them. Unlike prediction markets, there is no gambling framework in play, because an equity perp tracks a price, not the outcome of an event. What is left is a real character question: ordinary income under notional-principal-contract treatment, or capital gain under capital-asset treatment.
Do On-Chain Equity Perps Get The 60/40 Section 1256 Rate?
No. Section 1256 gives regulated futures a 60/40 blend of long-term and short-term rates, but it applies only to contracts meeting the statutory definition, including regulated futures contracts traded on qualified exchanges. Decentralized perpetual protocols do not currently fall within those definitions, so on-chain equity perps fail the test on the simplest possible basis.
The distinction that trips traders up:
- a CFTC-regulated equity or crypto futures contract on a US-registered exchange can qualify for 60/40 §1256 treatment
- an on-chain equity perp on Hyperliquid, Ondo, or a similar DeFi venue does not
Assuming 60/40 applies to your on-chain equity perps because "futures get 60/40" is an unsupportable position.
Two Equity Perp Frameworks Compared
With §1256 off the table, the open question is whether on-chain equity perp gains are ordinary or capital. The table below shows what each framework means on the same equity perp activity:
Capital Asset: The Common Practitioner Approach
Many practitioners currently default to capital treatment for on-chain equity perp activity because it aligns most closely with existing crypto property guidance, although the IRS has not specifically ruled on on-chain equity perpetuals. Under this approach each closed position is treated as a property transaction, with gains and losses reported on Form 8949 and Schedule D. Given no expiry and typically short holding periods, most equity perp gains would land as short-term capital gains, taxed at ordinary rates. The appeal is relative certainty: it relies on well-established crypto property principles and avoids taking an aggressive position the IRS has not addressed.
Notional Principal Contract: The Ordinary-Character Argument
There is a serious argument that an on-chain equity perp is a notional principal contract, because the funding rate is a periodic payment calculated by reference to a specified index on a notional amount. Under that framework, gains and losses on closing a position are ordinary rather than capital. This can help or hurt depending on your facts, ordinary losses are more usable, but ordinary gains lose any long-term rate. The character question is genuinely open, and the right answer depends on the specific contract terms and your trading profile. This is a position to build with a specialist, not to guess at.
How Are Equity Perp Funding Payments Taxed?
Funding payments are the periodic amounts exchanged between longs and shorts to keep an equity perp tethered to its reference price, and venues typically settle them on a set interval. The IRS has never addressed funding on on-chain perps, so this is a documented gray area with no direct guidance. A common conservative approach is:
- funding received is treated as ordinary income in the period received
- funding paid is commonly treated as a trading expense or an adjustment to trading PnL, depending on the reporting methodology adopted
Whichever method you pick, apply it consistently and document it. The practical problem is volume and fragmentation. Funding accrues on a schedule, and a trader running the same equity perp across 2 venues faces different funding intervals, different settlement currencies, and no summary from anyone. Cross-venue funding-rate arbitrage, now a named retail strategy, multiplies this into a dense reconstruction problem. Data clarity equals tax accuracy, and funding is where the data fragments first.
Are Equity Perp Dividends Taxable?
Usually there is no dividend to tax, and this is a common point of confusion. Equity perps generally do not confer ownership rights or dividend entitlements, so there is generally no dividend income to a US perp holder. Some protocols may instead incorporate dividend economics through a pricing or funding adjustment. Where that happens, the adjustment is captured inside the funding and PnL analysis above, not as separate dividend income. The dividend question is materially different for spot tokenized stocks, which can pass through dividend economics, and I cover that structure separately in my tokenized-stock tax guide.
Do I Still Owe Tax If I Used A VPN To Trade Equity Perps?
Yes. Most on-chain equity perp venues restrict or exclude US persons, but the tax obligation exists independently of how you accessed the venue. US persons are taxed on worldwide income, and using a VPN does not remove, reduce, or defer that. The VPN question is a separate securities and terms-of-service issue, and it does not change what you owe on your gains. Taxpayers who engaged in reportable digital asset transactions during the year generally must answer the Form 1040 digital-asset question accordingly, and report the activity.
What Are The Common Equity Perp Tax Mistakes?
The common on-chain equity perp tax mistakes cluster around the gap between what the venue reports, which is nothing, and what the trader actually owes. Most surface on returns we are asked to reconstruct after a notice arrives.
Reading No Form As No Tax
The most common on-chain equity perp mistake is treating "no 1099" as "no tax." On-chain equity perp venues are non-custodial and generally do not report customer activity to the IRS, but the full liability is still yours. Blockchain analytics and the Form 1099-DA data on the custodial USDC purchases that fund these venues give the IRS more visibility than traders assume.
Applying 60/40 To On-Chain Equity Perps
A second common equity perp mistake is claiming §1256 60/40 treatment on on-chain perps that do not qualify. No DeFi venue is a qualified board or exchange, so the 60/40 rate is not available, and filing as if it were is an aggressive position with no support.
Missing The Funding Layer
A third common equity perp mistake is ignoring funding payments because no summary is provided. Funding is a continuous stream of taxable touchpoints, and on a multi-venue equity perp reconstruction the funding layer is where the cost-basis trail breaks first.
Missing The USDC Funding Layer
A fourth common equity perp mistake is missing the taxable events in the USDC used to fund the venue. Acquiring, disposing of, or exchanging USDC can be a taxable event because the IRS treats digital assets as property, while simply moving USDC between your own wallets generally is not. USDC is pegged near $1 so any gain is usually small, but the layer still has to be tracked to keep the basis trail intact.
You should also understand:
- how to handle missing or inaccurate crypto transaction data
- how Form 8949 and Schedule D reporting actually works
- how airdrops and token receipts are taxed
Do You Need An Equity Perp Tax Specialist?
Most active on-chain equity perp traders need specialist help, because the open ordinary-versus-capital question, the funding-layer reconstruction, the USDC layer, and multi-venue reconciliation together create a decision tree that vendor tax software does not handle cleanly. Light single-venue activity can usually be filed without specialist help.
When You Probably Do Not Need A Specialist
Some on-chain equity perp activity is light enough to file without specialist help:
- a single equity perp venue with reliable, complete on-chain exports
- the capital asset framework defensible on the facts and applied consistently
- a small number of closed positions across the tax year
- no prior-year unreported equity perp activity
When You Probably Do Need A Specialist
Other on-chain equity perp activity moves into reconstruction territory and warrants a specialist crypto tax accountant:
- positions across 2 or more equity perp venues in the same tax year
- heavy funding activity, including cross-venue funding-rate arbitrage
- a material loss year where ordinary-versus-capital character changes the deductible amount
- USDC funding-layer reconciliation across Hyperliquid, Ondo, or other venues
- prior-year equity perp activity never reported, or filed under a character that may not survive examination
- cross-jurisdiction filing, such as a US person resident abroad trading on a non-US venue
How Are On-Chain Equity Perps Taxed Outside The US?
On-chain equity perp venues have a heavily non-US user base, so cross-border treatment matters. These summaries are high-level, and the precise treatment always depends on local rules and your personal facts.
How Are Equity Perps Taxed In Canada?
In Canada, the CRA generally treats closing an on-chain equity perp as either a capital gain, subject to the current capital gains inclusion rules, or business income, depending on how active and commercial the trading is. As I explain in my Canada crypto tax guide, high-frequency leveraged derivatives trading pushes toward business income.
How Are Equity Perps Taxed In The UK?
In the UK, many individual investors may fall within the Capital Gains Tax regime on on-chain equity perp gains, although frequent or commercial trading can produce different outcomes, as I cover in my UK crypto tax guide. Funding-heavy trading complicates the record-keeping further.
How Are Equity Perps Taxed In Australia?
In Australia, the ATO generally treats closing an on-chain equity perp as a CGT event, with active leveraged trading potentially assessed as ordinary income. The personal-use-asset carve-out does not apply to leveraged derivatives, a point I expand on in my Australia crypto tax guide.
How Are Equity Perps Taxed In Germany?
In Germany, on-chain equity perp gains are generally not eligible for the 1-year crypto holding exemption, because they are derivatives rather than spot crypto assets. My Germany crypto tax guide explains how the holding-period rules work for straightforward disposals.
CountDeFi Is Your Equity Perp Tax Solution
On-chain equity perp reporting in 2026 sits on a layered problem: the open ordinary-versus-capital character question, the failed §1256 case, the funding layer that no form reports, the USDC funding layer underneath it, and multi-venue reconciliation across venues that hand you nothing. We are not just accountants at CountDeFi, we are data scientists who work exclusively on crypto, which is what it takes to reconstruct an equity perp history that the venues record but no form reports.
We help high-complexity equity perp traders evaluate the character question, model the ordinary and capital outcomes before the position is locked in, reconstruct fragmented funding and USDC trails from raw on-chain data, and build defensible Form 8949 or ordinary-character positions. We use our proprietary Precision 7™ System to turn crypto data chaos into audit-proof tax reports.
Book A Free Call
No 1099 does not mean no liability, and the IRS may be able to reconstruct significant portions of trading activity using blockchain analytics together with information received from regulated intermediaries. If your on-chain equity perp activity spans multiple venues, heavy funding, or a material loss year, book a free call with one of CountDeFi's IRS crypto tax specialists before you file.
Frequently Asked Questions
Are On-Chain Equity Perps Legal For US Persons?
Most on-chain equity perp venues restrict or exclude US persons, so access is a securities and terms-of-service question separate from tax. Whatever the access position, a US person who trades equity perps owes US tax on the result, and reports it like any other disposal.
Do Equity Perp Venues Send A 1099?
No. On-chain equity perp venues are non-custodial, decentralized, and generally do not issue a Form 1099-DA, 1099-B, or 1099-MISC or report customer trading activity to the IRS. You self-report your taxable events from reconstructed on-chain data.
Are Equity Perps The Same As Tokenized Stocks?
No. A tokenized stock is a token backed by a real share, and it can carry dividend economics. An on-chain equity perp is a leveraged contract that only tracks the price, with no share, no dividend, and no voting rights. The two are taxed differently, which is why I cover them in separate guides.
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