Federal Tax Rule Change Could Boost Prediction Markets According to Coinbase

One aspect of the One Big Beautiful Bill Act is set to alter taxation on gaming from 2026 onward. It may also include crypto-related prediction markets.

According to a statement by Coinbase Institutional in its Crypto Market Outlook for 2026, new tax laws may make traditional gaming less attractive to some individuals. They may make event-related financial contracts more attractive.

The implication is that the deductions for the losses cannot exceed the winnings. Therefore, gamblers may be liable for taxes on their gross winnings even if they don't make a profit. Coinbase said the rule would apply broadly across sportsbooks - including the best sports betting sites - poker, and other high-risk trading activities that fall under gambling classifications. The firm argued that this structure could penalize frequent bettors who rely on losses to offset taxable income.

According to the institutional research team at Coinbase, a type of prediction market where bets are placed through financial contracts rather than traditional gambling bets could fare better under the new system. Because many prediction market apps on the blockchain function as derivatives related to physical events, they would likely face different tax structures.

Beyond tax considerations, Coinbase noted that prediction markets gained traction in 2025 as on-chain trading volumes rose sharply. The firm characterized these markets as an emerging component of crypto infrastructure, with applications extending beyond speculation into real-time forecasting. According to the report, pricing signals from active markets have increasingly rivaled traditional polling and some financial indicators in terms of speed and responsiveness.

The outlook highlighted several major issues with the structure. Liquidity in prediction markets is diversified across a few protocols, leading to inefficiencies. Coinbase believes that there could be aggregation platforms that would collect odds and liquidity from multiple sites.

Although facing an uncertain environment in terms of regulations, the company stated that there remained an increasing demand for decentralized and censorship-resistant prediction tools.

Coinbase expands with prediction markets

Against the backdrop of prediction market growth, Coinbase outlined a broader expansion of its trading ecosystem last week, positioning prediction markets alongside stocks, derivatives, and digital assets within a single platform. During its System Update stream, Coinbase said it plans on significantly increasing the range of assets available to users, aiming to consolidate activity that had previously been spread across multiple services.

The company said it would begin integrating prediction markets through a partnership with Kalshi, with additional integrations expected later. Coinbase also confirmed plans to offer stock trading, perpetual futures, and early access to newly issued tokens, alongside expanded support for Solana-based assets.

The goal is to allow users to manage crypto, equities, and event-based contracts within a single account using either USD or USDC.

At launch, Coinbase added that access would focus on hundreds of high-capitalization and high-volume names, with plans to add thousands more stocks and ETFs over time.