A change to U.S. tax rules contained in U.S. President Donald Trump’s One Big Beautiful Bill Act could shift speculative activity toward blockchain-based prediction markets, according to Coinbase Institutional’s 2026 Crypto Market Outlook.
“Starting in 2026, a provision of the One Big Beautiful Bill Act…will limit the deduction of gambling losses from winnings,” David Duong, Coinbase’s head of institutional research, wrote in the report released Friday.
The tax change has broad implications for players, including those active in sports betting, poker or commercial markets with similar risk profiles, because it will tax players on winnings they did not actually benefit from.
“Therefore, prediction markets, which use financial contracts similar to derivatives, could emerge as a more tax-efficient substitute for traditional sports betting and casinos,” Duong wrote in the report, suggesting that the structure of event-based crypto markets could offer more favorable treatment under the updated tax regime.
Beyond tax implications, Coinbase sees prediction markets emerging as a key pillar of the on-chain economy as notional trading volume has risen sharply in 2025. The company predicts that these markets could evolve into critical infrastructure for crypto, offering real-time prediction tools that rival traditional financial surveys and indicators.
Coinbase notes, however, that the industry remains fragmented, with many protocols operating independently and lacking common standards. The report anticipates the rise of prediction market aggregators – interfaces that consolidate odds and liquidity across platforms – as the next step in the maturation of the sector. As regulatory uncertainty persists, Coinbase suggests that demand for decentralized, censorship-resistant forecasting tools will continue to grow.
