U.S. Tax Law Shift Could Accelerate Growth of Crypto Prediction Markets

A proposed change to U.S. tax rules embedded in President Donald Trump’s One Big Beautiful Bill Act could significantly reshape speculative activity, potentially accelerating the adoption of blockchain-based prediction markets, according to Coinbase Institutional’s Crypto Market Outlook 2026.

In a report released Friday, Coinbase’s head of institutional research, David Duong, highlighted a provision set to take effect in 2026 that would limit how gambling losses can be deducted against winnings. Under the new rule, gamblers may be taxed on gross winnings rather than net profits, meaning individuals could owe taxes even if they did not ultimately make money. This shift could have wide-ranging consequences for participants in sportsbooks, poker, and other high-risk trading activities that resemble gambling from a tax perspective.

Coinbase argues that this change may unintentionally push speculative activity toward crypto-based prediction markets. Unlike traditional gambling platforms, prediction markets are built on financial contracts similar to derivatives, which may receive more favorable tax treatment under the updated framework. As a result, event-based crypto markets could emerge as a more tax-efficient alternative to casinos and sportsbooks for users seeking exposure to speculative outcomes.

Beyond tax considerations, Coinbase sees prediction markets becoming a core component of the onchain economy. The firm noted that notional trading volume in prediction markets surged in 2025, signaling growing interest from both retail and institutional participants. These platforms are increasingly viewed as powerful real-time forecasting tools, offering insights that can rival traditional opinion polls, surveys, and even some financial indicators.

However, the report also points out that the prediction market ecosystem remains highly fragmented. Many protocols operate in isolation, with limited interoperability and no shared standards. To address this, Coinbase anticipates the emergence of prediction market aggregators that combine liquidity and odds across multiple platforms, improving user experience and market efficiency.

While regulatory uncertainty around crypto prediction markets persists in the United States, Coinbase believes demand for decentralized, censorship-resistant forecasting tools will continue to grow. If tax policy shifts as expected, prediction markets could benefit from both regulatory arbitrage and increasing recognition as valuable financial infrastructure within the broader crypto economy.