The recent legislative changes brought about by President Trump’s One Big Beautiful Bill are set to reshape the gambling landscape significantly. As of 2026, a new provision will alter how gambling losses can be deducted against winnings, potentially leading gamblers to seek refuge in prediction markets.
Coinbase, a leading cryptocurrency exchange, highlights this shift in its 2026 outlook report. The report suggests that gamblers may face taxation on so-called “phantom” income, where their total winnings are small and do not offset their overall losses. This could make traditional gambling less appealing due to unfavorable tax implications.
How Prediction Markets Could Benefit Gamblers
Prediction markets operate using financial contracts similar to derivatives, making them a potentially more advantageous option for tax-conscious gamblers. These markets allow participants to bet on the outcome of various events, with the potential for more favorable tax treatment compared to traditional sportsbooks and casinos.
This shift is particularly noteworthy as Coinbase has actively supported the growth of prediction markets. The exchange has partnered with Kalshi, a platform that facilitates this form of gambling, thus ensuring its customers have access to these emerging markets.
Regulatory Challenges and Coinbase’s Legal Battle
Despite the potential benefits of prediction markets, regulatory hurdles remain. Coinbase currently faces opposition from state regulators who aim to limit prediction markets’ ability to offer event contracts for sports. In response, Coinbase has filed lawsuits against Michigan, Illinois, and Connecticut, asserting that the Commodity Futures Trading Commission (CFTC) should exclusively regulate prediction markets, not state gaming regulators.
The company argues that Congress has already designated the CFTC as the sole authority over these markets. If successful, this legal action could pave the way for broader adoption of prediction markets by removing state-level obstacles.
As the landscape of gambling taxation and regulation continues to evolve, prediction markets stand out as a viable alternative. By offering a potentially more tax-efficient solution, they may attract a significant number of traditional gamblers seeking to minimize their tax liabilities.
Coinbase’s proactive stance in promoting and defending prediction markets underscores the growing importance of these platforms in the broader financial ecosystem. As we approach 2026, the impact of Trump’s tax reforms will likely drive an increased interest in prediction markets, reshaping the gambling industry as we know it.
