Coinbase files lawsuits against states over prediction markets

Key points:

• Coinbase has filed lawsuits against Michigan, Illinois, and Connecticut, challenging the states’ right to regulate prediction markets.
• The company insists that such platforms fall under the exclusive jurisdiction of the CFTC and are not gambling.

Coinbase has escalated the dispute over the regulation of prediction markets by filing lawsuits against the authorities in Michigan, Illinois, and Connecticut. The company is seeking recognition that such markets fall under the exclusive jurisdiction of the federal Commodity Futures Trading Commission (CFTC) and are not regulated at the state level as gambling.

In its lawsuits, Coinbase insists that Congress has already designated the CFTC as the sole regulator of prediction markets, so attempts by states to restrict or ban them are contrary to federal law. The company’s Chief Legal Officer Paul Grewal said that interference by local regulators stifles innovation and exceeds their authority.

Source: X.com

The debate over the line between prediction markets and gambling

Coinbase emphasizes that prediction markets are not bookmakers. According to Grewal, they are neutral trading platforms that bring buyers and sellers together and have no interest in the outcome of events. He also noted that Congress has excluded only a limited list of commodities from the CFTC’s jurisdiction, which means that sporting events are formally subject to the commission’s control.

The company took a particularly tough stance in Illinois, saying that the state’s actions could cause it “immediate and irreparable” harm. The lawsuit was filed shortly after Coinbase announced its partnership with the CFTC-regulated Kalshi platform. Starting in January 2026, the company plans to offer event-based contract trading to customers across the country.

Interest in prediction markets has grown significantly over the past year, with platforms such as Kalshi and Polymarket attracting billions of dollars in turnover.

Source: The Block

However, this growth has met with resistance at the state level, where event contracts — especially those related to sports — are considered a form of unlicensed gambling. Connecticut has previously issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com, after which Kalshi obtained temporary federal court protection.