London Daily

Focus on the big picture.
Monday, Sep 15, 2025

Investors riding the NFT craze are facing billions in taxes

Investors riding the NFT craze are facing billions in taxes

The NFT market has ballooned to $44bn, Chainalysis data shows, and rules about taxing the tokens are not clear.

It’s one of the hottest corners of crypto – and now the U.S. government wants its share of the profits.

Investors and creators of nonfungible tokens – a market that has ballooned to $44 billion, Chainalysis data show, and attracted fans from Justin Bieber to Melania Trump – face billions of dollars in taxes and rates as high as 37%, according to tax experts. Internal Revenue Service officials who deal with tax evaders say they are gearing up for a crackdown.

The surprises looming for NFT enthusiasts when tax filing season begins this month are crypto’s latest wake-up call from Washington as officials across the U.S. government set their sights on the burgeoning industry. The rules about taxing tokens aren’t clear, leaving NFT collectors scrambling to calculate how much they owe. Investors may not realize they need to pay any taxes at all or that they should file more than once a year, increasing the odds they’ll face future penalties.

“You don’t get to not report gains or losses because the IRS has failed to provide guidance that meets your expectations,” said San Francisco-based tax attorney James Creech. “The harder it is for people to get to a reasonable — or ideally, a right — conclusion, the easier it is to ignore it.”


NFTs gained attention as representations of digital art and are expected to be a key part of the so-called metaverse that tech titans like Mark Zuckerberg say is the future of the Internet. The tokens are digital certificates of authenticity and can’t be replicated, which potentially increases their value.

Token sales skyrocketed last year, with NFTs such as CryptoPunk #3100 — which features an alien sporting a headband — selling for $7.7 million after an initial price of $2,000 in mid-2017. “Everydays: the First 5000 Days” from digital artist Mike Winkelmann, also known as Beeple, sold for an eye-popping $69.3 million.

Like so much in the crypto universe, it’s hard to compare tokens to more traditional investments and regulators including those at the IRS are grappling over how to police them.

When a creator sells an NFT on a platform like OpenSea or Rarible, most tax experts agree that the profits should be considered ordinary income and be subject to a rate as high as 37%. Investors who buy the tokens owe capital-gains taxes if they used another cryptocurrency for the purchase, and when they sell it.

Beyond that, the rules are murky. There are questions about whether tokens should be taxed like art “collectibles,” which comes with a long-term capital-gains rate of up to 28%. That’s compared to 20% for most cryptocurrencies and stocks. The infrastructure bill President Joe Biden signed into law last year will make it harder for people to hide digital assets, but the Treasury Department has not said whether that includes NFTs.

It’s hard to calculate exactly how much tax is owed, but experts such as Arthur Teller, chief operating officer at TokenTax, estimate the total NFT tax bill could run into the billions. Some people aren’t aware they owe taxes quarterly and may already face penalties for just filing an annual return, said TokenTax’s co-founder, Zac McClure. Other people likely don’t know there are any reporting requirements, said Shehan Chandrasekera, head of tax strategy at CoinTracker.

Tax Evasion


With so much money at stake, the IRS will likely be forced to clarify the rules, but it may begin auditing people first, said Michael Desmond, the former chief counsel at the IRS who is now a partner at Gibson, Dunn & Crutcher.

IRS investigators are preparing for a possible surge in cases as soon as this year.

“We subsequently will probably see an influx of potential NFT type tax evasion, or other crypto-asset tax evasion cases coming through” said Jarod Koopman, acting executive director of cyber and forensic services at the IRS’s criminal investigation division.

Meantime, NFT aficionados should brace for a lot more paperwork.

“It’s an absolute nightmare,” said Adam Hollander, an NFT investor and creator of the “Hungry Wolves” collection, adding that he has spent 50 hours combing through months of transactions. “There are people who aren’t going to be willing to do what I’m doing.”

Newsletter

Related Articles

0:00
0:00
Close
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
×