Published on: December 29, 2025, at 04:30h.
Updated on: December 29, 2025, at 04:30h.
- Coinbase predicts significant growth in prediction markets, highlighting increased “scale and liquidity.”
- Indicates that fragmentation may lead to the development of prediction market aggregators.
- The cryptocurrency brokerage giant recently outlined its vision for prediction markets.
Coinbase Global (NASDAQ: COIN), the leading cryptocurrency brokerage, has revealed its plans for prediction markets, asserting that the event contracts sector is poised for a multi-year “transformational phase” where derivatives will transition from “niche speculative tools” to widely accepted financial instruments.
These insights were shared in Coinbase’s 2026 Crypto Market Outlook report, co-authored by David Duong, the global head of research, and research associate Colin Basco. The firm emphasizes that improved liquidity and market scale could catalyze broader adoption of prediction markets.
This development might promote enhanced maturity in market structure, governance, and regulatory oversight, thereby solidifying their role in the larger financial ecosystem,” the report states.
Earlier this month, Coinbase, the largest cryptocurrency brokerage in the U.S., announced that it would introduce prediction markets on its trading platform through a collaboration with Kalshi.
The Fragmentation of Prediction Markets May Encourage Aggregation
Recently, it seems there have been almost daily announcements about new prediction market initiatives, largely driven by cryptocurrency brokerages and established online sportsbooks entering the space.
Currently, about a dozen prediction markets are available to bettors and traders in the U.S. This number is expected to grow in 2026. While this expansion may enhance choices for consumers, Coinbase cautions that it could also lead to increased fragmentation. The leading digital currency trading entity highlights that this scenario might stimulate demand for aggregation services.
“This could signal the emergence of prediction market aggregators, which may become the primary interface for the industry,” Coinbase notes. “These aggregators will connect with major prediction market protocols via smart contract frameworks and APIs, facilitating the consolidation of billions in fragmented weekly volume while offering users a comprehensive, real-time overview of event odds.”
Such aggregation could be crucial in attracting more institutional investors, who are deemed vital for encouraging the adoption of prediction markets and enhancing liquidity.
A Shift in Betting Tax Regulations Might Favor Prediction Markets
As highlighted in recent discussions, President Donald Trump’s One Big Beautiful Bill (OBBB) includes a provision that reduces the deductibility of bettors’ losses to 90% of winnings, down from 100%. This change could attract more bettors to prediction markets, especially given the ongoing uncertainties regarding the tax treatment of event contracts.
Coinbase posits that prediction markets could serve as a tax-friendly alternative to traditional casinos and sports betting.
“Although this adjustment may seem minor, it could result in taxpayers being taxed on phantom income, even in situations where their actual winnings are minimal or they experience a net loss,” Coinbase observes. “As a result, prediction markets, which utilize financial contracts comparable to derivatives, might emerge as a more tax-efficient alternative to conventional sportsbooks and casinos.”