Coinbase Predicts Big Change Coming for US Prediction Markets

Coinbase thinks the US prediction markets are about to hit a turning point. This change could reshape how people trade and view event-based contracts. In its latest 2026 Crypto Market Outlook, the crypto exchange says prediction markets are growing. They are moving away from their image as niche betting products and becoming real financial tools.

Liquidity and Scale to Drive Next Phase of Prediction Markets

The report says stronger liquidity and more people joining in will push this change in the next few years. As more trades happen, Coinbase expects to see better market design, clearer rules, and stronger governance. The company believes these steps need to happen for prediction markets to fit in better with the wider world of finance.

The report comes right after Coinbase launched its own prediction market product through a team-up with Kalshi. The company sees the timing as key, pointing out that event contracts are gaining traction among both crypto-focused firms and regular betting companies. Right now, about 12 platforms are up and running in the US, but Coinbase thinks this number will grow even more by 2026.

Though more competition might give users extra options, Coinbase cautions that it could also spread liquidity too thin across many platforms. The company suggests this split could pave the way for new services that focus on bringing things together. These platforms would link up with various prediction market protocols through smart contracts and APIs, showing users combined odds and better liquidity in one place. Coinbase thinks these tools could play a big role in drawing in big investors, who are seen as crucial to keep large-scale growth going.

Coinbase Sees Betting Tax Shift Favoring Prediction Markets

Another thing that might help prediction markets is a recent change in US betting tax rules. A new law this year says gamblers can now deduct 90% of their losses against their winnings, not the full amount. Coinbase points out that this change could mean some bettors owe taxes even if their net gains are minimal or negative.

Since it is not clear how event contracts are taxed, Coinbase thinks prediction markets could become a better option than regular sportsbooks and casinos. Event contracts look more like financial products than bets, so people who use them might not face the same problems from the new betting tax rules.

Despite the positive outlook, regulation remains unclear. Legal battles between platforms and state officials continue over prediction markets, with questions about whether federal or state bodies should oversee them. Coinbase has argued that these products should fall under federal commodities rules.

Still, the company sees the current situation as a chance to grow, not a threat. Coinbase believes prediction markets will become much more important in US financial trading in the future, thanks to their increasing size, better systems, and changing tax situation.