Coinbase Files Lawsuits Against US States Over Prediction Markets Regulation

• Coinbase has sued Michigan, Illinois, and Connecticut, challenging state authority over prediction markets.
• The exchange argues that prediction markets fall exclusively under CFTC jurisdiction, as defined by Congress.
• Lawsuits support Coinbase’s plan to launch CFTC-regulated prediction markets with Kalshi in 2026.

Coinbase has filed a lawsuit against the U.S. states of Michigan, Illinois, and Connecticut, marking the intensification of a growing battle over which entities have the right to control prediction markets within the United States.

The crypto exchange filed lawsuits on Thursday, seeking a ruling court that the regulation of prediction markets lies solely within the remit of the Commodity Futures Trading Commission (CFTC). Coinbase asserts that this has been made clear by Congress within existing law.

According to the company, the move by states is illegitimate since it attempts to prevent and regulate the use of prediction markets. Coinbase argues that it impedes innovation and violates federal laws.

“Today, we filed suit in CT, MI, and IL to establish what is clearly the case: prediction markets are clearly the province of the CFTC and not the province of any particular state gaming authority,” said Coinbase Chief Legal Officer Paul Grewal in a post on X. He further reiterated that this is against the law.

In its lawsuit filed in Illinois, Coinbase sought a declaratory injunction or relief, claiming that state action would cause an “imminent and irreparable” harm to its business if not enjoined.

Source: ctfassets.net

Grewal dismissed a contention by the states that sports-related prediction markets are outside the jurisdiction of the CFTC. Congress did not exclude many items from the definition of a commodity. These items include onions and movie box office results. Everything else is within the jurisdiction of the CFTC.

In addition, he observed that there are differences between prediction markets and sports books, in that prediction markets are not like sports books found in casinos, which earn money because of the loss of the gamblers.

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Coinbase Kalshi Prediction Market Push

Lawsuits align with Coinbase’s strategy on entering the prediction market with Kalshi under CFTC regulation. In the case filed in an Illinois court, Coinbase claims it intends to launch event-based contracts for U.S. residents, with that happening in January 2026.

Prediction markets have grown in popularity lately. Kalshi and Polymarket have recorded billions of dollars worth of trading activity. The market has encountered setbacks in various states.

State officials argue that contracts that center on events, such as those involving sporting outcomes, are illegal forms of gambling that must receive state-law authorization.

In early November, Connecticut authorities served cease-and-desist orders on Kalshi, Robinhood, and Crypto.com regarding illegal sports betting products. However, Kalshi contested the notice in court and obtained a stay of action through a federal judge.

The recent lawsuits filed by Coinbase reflect that the struggle for prediction market control is far from being over, and this has major implications for event-based contracts in the U.S. crypto and finance sectors.

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