Coinbase Files Lawsuits Against Three States Over Markets

• Coinbase filed lawsuits against Michigan, Illinois, and Connecticut over market regulation.
• Exchange seeks court orders stating that prediction markets fall under CFTC jurisdiction only.
• Chief Legal Officer states that state intervention would cause immediate irreparable harm.

Coinbase filed lawsuits Thursday against Michigan, Illinois, and Connecticut, escalating a legal dispute over state authority to regulate prediction markets. The exchange seeks court orders affirming that prediction markets fall under exclusive Commodity Futures Trading Commission jurisdiction rather than state gaming regulators.

Coinbase argued that Congress designated the CFTC as the sole regulator for prediction markets, leaving states without authority to intervene. Chief Legal Officer Paul Grewal stated on X that prediction markets fall squarely under CFTC jurisdiction, not individual state gaming regulators.

Exchange Requests Declaratory and Injunctive Relief

Coinbase requested declaratory and injunctive relief in its Illinois filing, stating that state intervention would cause immediate and irreparable harm to the company. The exchange called for courts to confirm federal preemption over state regulatory attempts.

Grewal stated that state efforts to control or block these markets stifle innovation and violate federal law. Some states have falsely argued that prediction markets tied to sports fall outside CFTC jurisdiction, according to the legal officer.

Congress excluded only a narrow set of underlying assets from the commodity definition, including onions and motion picture box office receipts. This signals that all other subjects, including sporting events, fall within the CFTC’s regulatory scope, Grewal explained.

The exchange executive emphasized that prediction markets function fundamentally differently from sportsbooks. Casinos win only when customers lose and set odds to maximize profits. Prediction markets operate as neutral exchanges indifferent to price that match buyers and sellers.

Coinbase Expands Through Kalshi Integration

The lawsuits arrive as Coinbase expands into prediction markets through integration with Kalshi. The exchange announced plans to power prediction markets via the Kalshi partnership as part of its strategy to become an “everything exchange.”

Coinbase is rolling out commission-free stock and ETF trading, Solana DEX trading through Jupiter integration, derivatives, custom stablecoins, and expanded payment services. The company aims to keep users on-platform for both centralized and onchain activity.

The prediction market integration is just one component of Coinbase’s broader service expansion. The exchange is pushing into AI tools through Coinbase Advisor, business banking via Coinbase Business, and deeper onchain capabilities through its Base App. The lawsuits challenge state regulatory authority over a market segment that Coinbase views as critical to its expansion strategy.

Related: India Approves Coinbase Investment in CoinDCX Exchange