Coinbase believes tax-conscious gamblers may increasingly turn to prediction markets as U.S. tax rules for gambling change. In its 2026 outlook report released this week, the exchange said a provision in the One Big Beautiful Bill Act, signed into law by President Donald Trump in July 2025, will take effect in 2026 and limit the deduction of gambling losses against winnings.

According to Coinbase, the change could result in taxpayers being taxed on “phantom” income, even when their winnings are minimal and they incur an overall net loss. As a result, prediction markets, which rely on financial contracts similar to derivatives, could emerge as a more tax-advantageous substitute to traditional sportsbooks and casinos.

Coinbase acknowledged that its stance aligns with its business strategy, as the company recently partnered with Kalshi to give customers access to prediction markets. At the same time, the exchange is pushing back against state regulators, suing Michigan, Illinois, and Connecticut to argue that prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission rather than state gaming authorities.