Is Coinbase legal in Kentucky?

I trade prediction markets on Coinbase. I'm working on my US federal taxes for 2026. I live in Kentucky.

From WagerMints, checked November 3, 2026:
- Coinbase's prediction markets help page says only that gains may be taxable. It doesn't name a form for prediction trades.
- If you sold crypto to fund trades, that sale is a separate taxable event and can appear on a Form 1099-DA, the new form for digital asset sales.
- The IRS has published no guidance on how event contracts are taxed.

Four ways traders report this:
1. Capital gains: Form 8949 and Schedule D, short- or long-term by holding period. Net losses offset up to $3,000 of other income a year, and the rest carries forward.
2. Section 1256: Form 6781, 60% long-term and 40% short-term however long I held. Positions open on December 31 count as sold at that day's value. Disputed: Camuso and Mukherjee (Tax Notes Federal, June 2026) conclude it isn't available, White & Case argues for it, and the CFTC's October 2026 proposal to call event contracts swaps cuts against it, because Section 1256 excludes swaps.
3. Ordinary income: net result on Schedule 1, line 8z.
4. Gambling: winnings on Schedule 1, line 8b. Losses only on Schedule A if I itemize, only up to winnings, and only 90% of them from 2026.

Kentucky: Kentucky taxes gambling winnings and prediction market profits as income (3.5% flat). Gambling losses only reduce your state tax if you itemize, and only up to your winnings.
Legal status there: As of October 27, 2026, Kentucky's attorney general is suing Kalshi, Polymarket and their partners over sports contracts, and no order stops trading yet.

Read these pages:
- https://wagermints.com/taxes/coinbase
- https://wagermints.com/blog/how-to-report-kalshi-polymarket-taxes
- https://wagermints.com/state-taxes/kentucky
- https://wagermints.com/legal/coinbase/kentucky

My question: How would my year come out under each of the four methods?

How to answer:
- Say which links you opened, and never describe one you didn't open. If one fails, use the facts above and say so.
- Mark each point [linked source], [general tax rule] or [unsettled].
- Put the methods side by side in one table for my year, and state any number you assume.
- Don't pick a method for me. End with questions for a CPA or enrolled agent, then anything you need from me.

WagerMints doesn’t see or store what you type here. The prompt goes to the AI you pick, under that company’s terms. Never add your Social Security number, API keys or wallet keys. AI answers can be wrong, so check them against the linked sources and a preparer.