Crypto exchange Coinbase has filed lawsuits against three US states over regulatory conflicts surrounding the classification of event contracts, as it hopes to secure federal protection for its newly launched prediction markets.
Coinbase challenges state authority over prediction markets
Per a Dec. 19 X post from the exchange’s chief legal officer Paul Grewal, Coinbase has filed legal actions against the states of Michigan, Illinois, and Connecticut, where it has asked federal courts to affirm that prediction markets fall under the purview of the Commodity Futures Trading Commission rather than state-level gambling laws.
“Some states think prediction markets fall outside the CFTC’s jurisdiction when they relate to sports. But Congress deliberately chose to exclude only a handful of specific underliers—including onions and motion picture box office receipts—from the definition of commodity. This makes clear that all other subjects (including sporting events) fall within the CFTC’s scope,” Grewal wrote.
Coinbase has framed the dispute as both a legal and structural issue in its court filings, arguing that if each state is allowed to independently determine the legality of federally supervised prediction markets, that would mean the most restrictive regime effectively becomes the national standard.
Coinbase says prediction markets are not gambling
Meanwhile, Grewal has repeatedly stressed that Coinbase’s planned markets and traditional sportsbooks are not the same.
“Casinos win only if you lose and set odds to maximize their profits. Prediction markets are neutral exchanges, indifferent to price, that match buyers and sellers,” he explained.
As such, the exchange believes treating both financial event contracts and sports betting platforms as the same product would misinterpret the law and go against the federal framework that should govern derivatives under the Commodity Exchange Act.
Coinbase launched its prediction markets earlier this week, with the product integrated directly within its main app interface alongside crypto and stock trading.
US states push back against prediction markets
Coinbase’s preemptive legal strategy comes as a number of state regulators and gaming commissions have gone up against prediction market offerings from various issuers such as Kalshi, Crypto.com, and Robinhood.
Kalshi, for instance, is embroiled in multiple lawsuits at the time.
Even though the CFTC formally approved Kalshi’s event markets last year after a lengthy review, the platform has faced opposition across states like Maryland, Nevada, and Massachusetts.
Regulators have argued that event contracts tied to sports or politics functionally resemble betting and therefore fall under state jurisdiction as gambling.
Kalshi, in the meantime, has taken an aggressive legal posture and has initiated federal lawsuits against state regulators from the outset.
Its efforts have produced mixed results, with some federal courts issuing temporary protections in places like New Jersey and Connecticut, while others, like Maryland and Nevada, have sided with state regulators and allowed enforcement actions to proceed.
Most recently, the state of Connecticut issued a cease-and-desist order against Kalshi, prompting a swift legal challenge and a temporary reprieve ahead of a key hearing in February 2026.
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