Coinbase sues states over prediction markets
The confrontation between Coinbase and several U.S. state regulators over prediction markets has escalated to a new level. The company filed federal lawsuits against Michigan, Illinois, and Connecticut, arguing that these states are acting beyond their authority by attempting to regulate products that, according to federal law, fall exclusively under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
The legal actions were filed on December 18 and seek to halt state initiatives that, according to Coinbase, aim to block or restrict event contracts operating under a federal framework. The company’s Chief Legal Officer, Paul Grewal, publicly stated that state gaming boards lack the authority to intervene in federally registered exchanges.
The company points out that the central goal of these lawsuits is to establish a clear precedent: states cannot apply local gaming regulations to prediction markets overseen by the CFTC.
A legal step prior to the product launch
The legal move coincides with Coinbase’s plans to directly enter the prediction markets business. The company recently announced a partnership with Kalshi, a platform already regulated by the CFTC, to offer event-based contracts to U.S. users starting in January 2026.
Illinois, one of the states sued, is among the jurisdictions where the initial service launch is expected. According to Grewal, the legal offensive seeks to resolve an unequivocal issue: “Prediction markets fall under the jurisdiction of the CFTC, not state gaming regulators,” he stated, adding that the states’ actions “conflict with federal law and stifle innovation.”
Operational risk and irreparable harm
In the documents submitted to the courts, especially in the Illinois case, Coinbase warns that continued state interventions could cause immediate and irreparable harm to its business. For this reason, it requests injunctions to suspend any enforcement actions while the core dispute is resolved.
The heart of the dispute revolves around the legal classification of prediction markets. Several states argue that contracts linked to sports outcomes are equivalent to unlicensed gambling and therefore should fall under state gaming laws.
Coinbase rejects this approach and argues that these markets operate as neutral exchange platforms, where buyers and sellers interact freely, without the operator acting as a bookmaker setting odds for profit.
The company also recalled that Congress broadly defined the concept of commodities, excluding only very specific categories. Under this logic, sports event contracts would not fall outside the CFTC’s scope.
A conflict now involving ten states
With these new lawsuits, the conflict over prediction markets has expanded significantly. What began with cease-and-desist orders issued by some state regulators now involves at least ten states, including Maryland, New Jersey, Ohio, Nevada, Massachusetts, and New York.
Furthermore, the debate has gone beyond the state level. In California and Wisconsin, indigenous tribes have also initiated legal actions against prediction market operators, alleging infringements on their exclusive gaming rights.
In its court filing, Coinbase warned that allowing fragmented state-by-state regulation would create an inconsistent system contrary to the spirit of federal legislation. According to the company, an encroachment of state powers over the CFTC would jeopardize the national uniformity that Congress sought to guarantee in futures and derivatives markets.
Tags: United States, USA, Coinbase, Coinbase Predictions