Core Viewpoint - Sports betting platforms Kalshi and Polymarket may offer a tax advantage over traditional sportsbooks until the IRS provides further clarification on the tax implications [1] Group 1 - Kalshi and Polymarket operate in a regulatory environment that could potentially favor their tax treatment compared to conventional sportsbooks [1] - The current tax status of sports betting on these platforms remains uncertain, pending IRS guidance [1]

Core Viewpoint - A change in U.S. tax rules under President Trump's One Big Beautiful Bill Act may redirect speculative activities towards blockchain-based prediction markets, as outlined in Coinbase Institutional's Crypto Market Outlook 2026 [1] Tax Implications - Starting in 2026, a provision will limit the deduction for gambling losses against winnings, impacting gamblers across various platforms such as sportsbooks and poker [2][1] - This tax change will result in taxation on gambling wins that do not reflect actual profits, creating a potential disadvantage for traditional gambling activities [2] Prediction Markets - Prediction markets, which operate similarly to derivatives, could become a more tax-advantageous alternative to traditional sportsbooks and casinos under the new tax regime [3][1] - Coinbase anticipates that these markets will play a significant role in the onchain economy, with notional trading volume expected to increase sharply in 2025 [4] Market Development - The prediction market sector is currently fragmented, with many independent protocols lacking shared standards [5] - The emergence of prediction market aggregators is expected as a crucial step towards the maturation of the sector, consolidating odds and liquidity across different platforms [5] - Despite regulatory uncertainties, the demand for decentralized and censorship-resistant forecasting tools is projected to grow [5]