Coinbase Thinks New US Tax Rules Could Boost Crypto Prediction

Coinbase is sounding the alarm on a quiet tax change that could reshape how Americans place bets.

Starting in 2026, new US rules will limit how much gambling losses can be deducted from winnings.

While this may seem like a technical adjustment, Coinbase believes it could make traditional betting far less appealing for frequent gamblers.

In contrast, crypto powered prediction markets often fall under financial tax rules that allow more flexible loss treatment.

As a result, speculative activity may slowly shift away from sportsbooks and casinos and toward blockchain based markets that look and behave more like financial trading.

If you are interested in crypto trading, explore Bitrue and enhance your experience. Bitrue is dedicated to providing safe, convenient, and diversified services to meet all crypto needs, including trading, investing, purchasing, staking, borrowing, and more.

Key Takeaways

1. New US tax rules may tax gamblers even when they have no net profit.

2. Coinbase sees prediction markets as a more tax efficient alternative.

3. The change could increase adoption of crypto based prediction platforms.

How New US Gambling Tax Rules Change The Math

The shift begins with the One Big Beautiful Bill Act, signed into law in July 2025. A key provision takes effect on January 1, 2026, and directly impacts how gambling income is taxed.

Under the new framework, gamblers can deduct only 90% of their losses against 100% of their winnings.

Why This Matters for Frequent Bettors

Under the old system, losses could fully offset winnings up to the same amount. The new rule changes that balance.

• A gambler who wins and loses the same amount may still owe taxes

• High volume betting can trigger tax bills without real profits

• Effective tax rates increase even for break even years

Coinbase refers to this as phantom income. In simple terms, the IRS may treat gamblers as earning income even when they walk away flat or negative.

For professionals or active bettors, this could make regulated US gambling economically unattractive.

Read Also: Coinbase Outage: How Institutions Still Supports Base’s Ecosystem

Why Prediction Markets Get Better Tax Treatment

Coinbase argues that prediction markets operate under a very different framework. Instead of being classified as gambling, many platforms structure their products as financial contracts similar to derivatives. This distinction has major tax implications.

Financial Instruments Versus Gambling Wagers

Prediction markets often fall under commodity or futures rules rather than gaming laws.

• Losses can be fully netted against gains

• Excess losses may offset ordinary income within limits

• Losses can often be carried forward to future years

Platforms like Kalshi treat contracts as Section 1256 instruments, which allows traders to avoid the deduction cap that applies to gambling.

For tax conscious participants, this structure offers flexibility that sportsbooks simply cannot match under the new rules.

Coinbase believes this advantage could make prediction markets more attractive to users who care about efficiency and transparency.

Read Also: Coinbase CEO Urges Institutions to Bet Big: 5-10% Portfolio in Crypto

Coinbase Push for Prediction Market Access

Coinbase interest in prediction markets is not theoretical. The exchange has partnered with Kalshi to bring regulated prediction markets to its customers.

At the same time, it has taken an aggressive stance against state regulators attempting to block these platforms.

Federal Oversight Versus State Regulation

Coinbase argues that prediction markets fall under the exclusive authority of the Commodity Futures Trading Commission.

• Congress has designated the CFTC as the primary regulator

• State gaming regulators should not intervene

• A unified framework reduces legal uncertainty

The exchange is currently suing Michigan, Illinois, and Connecticut to affirm this position. Coinbase believes clearer oversight combined with favorable tax treatment could accelerate adoption as 2026 approaches.

Read Also: Coinbase CEO Shocks Market With Bold $1M Bitcoin Prediction by 2030

Conclusion

Coinbase view highlights how tax policy can quietly reshape entire markets. By limiting gambling loss deductions, the US may unintentionally push speculative activity toward platforms treated as financial markets rather than betting venues.

Prediction markets, especially those built on crypto infrastructure, stand to benefit from this shift. As interest in crypto based speculation grows, traders need platforms that balance access, security, and compliance.

Bitrue offers an easier and safer way to trade digital assets while navigating changing market conditions.

With strong liquidity and a user focused design, Bitrue helps traders stay flexible as regulation and tax rules continue to evolve across the crypto landscape.

FAQ

What is the One Big Beautiful Bill Act?

It is a US law signed in 2025 that includes new tax rules affecting gambling income starting in 2026.

Why does Coinbase think gamblers will move to prediction markets?

Prediction markets may offer better tax treatment by allowing fuller loss offsets under financial tax rules.

What is phantom income in gambling taxes?

It refers to taxable income created even when gamblers have no net profit due to deduction limits.

How are prediction markets taxed differently?

They are often treated as financial instruments rather than wagers, allowing more flexible loss handling.

Does Coinbase offer access to prediction markets?

Yes, Coinbase has partnered with Kalshi and is actively defending prediction markets at the regulatory level.

Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.