Prediction markets may offer a tax loophole for gamblers under Trump’s Big Beautiful Bill, Coinbase says
TL;DR
Coinbase reports that a 2026 tax rule in Trump's One Big Beautiful Bill Act will limit gambling loss deductions, potentially making prediction markets more tax-advantageous as they're structured like derivatives. The firm sees prediction markets becoming key crypto infrastructure despite current fragmentation and regulatory uncertainty.
Key Takeaways
- •A 2026 tax provision will limit how gamblers can deduct losses against winnings, increasing tax burdens on traditional gambling activities.
- •Prediction markets may offer better tax treatment because they're structured as financial contracts similar to derivatives rather than pure gambling.
- •Coinbase expects prediction markets to evolve into essential crypto infrastructure with growing trading volume and demand for decentralized forecasting tools.
- •The prediction market sector remains fragmented with many independent protocols, but aggregators are expected to emerge as the market matures.
- •Regulatory uncertainty persists, but demand for censorship-resistant forecasting tools continues to grow despite current challenges.
What to know:
- A 2026 tax rule in the One Big Beautiful Bill Act will limit how gamblers deduct losses against winnings, Coinbase says, with prediction markets perhaps offering more favorable tax treatment due to their structure as financial contracts akin to derivatives.
- Coinbase expects prediction markets to become key crypto infrastructure, despite current fragmentation and regulatory uncertainty.
- A 2026 tax rule in the One Big Beautiful Bill Act will limit how gamblers deduct losses against winnings, Coinbase says, with prediction markets perhaps offering more favorable tax treatment due to their structure as financial contracts akin to derivatives.
- Coinbase expects prediction markets to become key crypto infrastructure, despite current fragmentation and regulatory uncertainty.
A change to U.S. tax rules tucked inside 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 Crypto Market Outlook 2026.
“Starting in 2026, a provision in the One Big Beautiful Bill Act… will limit the deduction for gambling losses against winnings,” David Duong, Coinbase’s head of institutional research, wrote in the report released on Friday.
The tax change carries broad implications for gamblers, including those active in sportsbooks, poker, or trading markets with similar risk profiles, as it will tax gamblers on wins that they didn't actually profit from.
“Consequently, prediction markets, which utilize financial contracts akin to derivatives, could emerge as a more tax-advantageous substitute to traditional sportsbooks and casinos,” Duong wrote in the report, suggesting that the structure of event-based crypto markets may offer more favorable treatment under the updated tax regime.
Beyond the tax implications, Coinbase sees prediction markets emerging as a key pillar of the onchain economy as notional trading volume rose sharply in 2025. The firm predicts that these markets could evolve into essential infrastructure for crypto, offering real-time forecasting tools that rival traditional polling and financial indicators.
Still, Coinbase notes that the sector remains fragmented, with many protocols operating independently and lacking shared standards. The report anticipates the rise of prediction market aggregators — interfaces that consolidate odds and liquidity across platforms — as a next step in the sector’s maturation. While regulatory uncertainty lingers, Coinbase suggests that the demand for decentralized, censorship-resistant forecasting tools will continue to grow.
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