UPDATE: Coinbase just announced a significant transformation is on the horizon for US prediction markets, which could redefine how traders engage with event-based contracts. In its latest report, the 2026 Crypto Market Outlook, the crypto exchange reveals that prediction markets are evolving from niche gambling tools to mainstream financial instruments.
According to Coinbase, stronger liquidity and an influx of new participants are set to drive this pivotal change in the coming years. As trading volumes increase, the company anticipates enhanced market designs, clearer regulations, and improved governance structures. These advancements are essential for integrating prediction markets more seamlessly into the broader financial landscape.
This announcement follows Coinbase’s recent launch of its own prediction market product in collaboration with Kalshi, marking a strategic move to capitalize on the growing interest in event contracts among both crypto firms and traditional betting companies. Currently, there are about 12 platforms operating in the United States, but Coinbase predicts that number will surge significantly by 2026.
While increased competition may provide users with more options, Coinbase warns that it could dilute liquidity across platforms. The company suggests that this fragmentation might spur the development of new services that unify various prediction market protocols through smart contracts and APIs, offering users aggregated odds and enhanced liquidity in one convenient location. This innovation is seen as crucial for attracting larger investors, who are vital for sustaining robust market growth.
Coinbase also highlighted a recent shift in US betting tax regulations that could benefit prediction markets. A new law allows gamblers to deduct 90% of their losses against winnings, raising concerns that some bettors may face tax liabilities even when their net gains are minimal or negative. Since the tax implications for event contracts remain ambiguous, Coinbase argues that prediction markets could emerge as a more advantageous alternative to conventional sportsbooks and casinos, presenting themselves as financial products rather than mere bets.
Despite the promising outlook, regulatory uncertainties loom large. Ongoing legal disputes between prediction market platforms and state officials continue to raise questions about whether these markets should be governed by federal or state regulations. Coinbase maintains that these products should be classified under federal commodities laws. However, the company views the current regulatory environment as an opportunity for growth rather than a hindrance.
With these developments, Coinbase believes prediction markets will gain increasing importance in US financial trading. Their growing scale, improved systems, and evolving tax regulations position them as a key player in the future of trading in the United States.
As this story unfolds, industry watchers will need to stay tuned for further updates on how these changes will impact traders, investors, and the overall financial market landscape.
