Coinbase has sued Connecticut, Illinois and Michigan
in federal court, arguing that state officials are unlawfully trying to
regulate prediction markets as gambling products.
The crypto exchange wants judges to confirm that
event-based contracts on its platform fall under the exclusive jurisdiction of
the US Commodity Futures Trading Commission (CFTC), not state gaming
regulators, Coinbase’s Chief Legal Officer Paul Grewal announced on
X.
Coinbase has filed federal lawsuits against
Connecticut, Michigan and Illinois, arguing that those states cannot use
gambling statutes to shut down or restrict prediction markets.
The complaints seek declaratory and injunctive relief
that would establish CFTC as the
sole regulator of event contracts listed on its platform.
What Coinbase Is Fighting Over
Prediction markets allow users to buy and sell
contracts linked to future outcomes, from sports results to monetary policy
decisions or election results. The contracts settle based on whether an event occurs,
which makes them a form of derivative whose value depends on a future state of
the world.
Today @coinbase filed lawsuits in CT, MI, and IL to confirm what is clear: prediction markets fall squarely under the jurisdiction of the @CFTC, not any individual state gaming regulator (let alone 50). State efforts to control or outright block these markets stifle innovation…
— paulgrewal.eth (@iampaulgrewal) December 19, 2025
State gaming agencies in Connecticut, Illinois and
other jurisdictions argue that many of these contracts, especially
sports-related ones, function as unlicensed betting and therefore fall under
gambling law.
Chief Legal Officer Paul Grewal framed the lawsuits as
a test of federal preemption, insisting that “prediction markets fall squarely
under the jurisdiction of the Commodity Futures Trading Commission, not any
individual state gaming regulator.” He described state attempts to control or
block these markets as efforts that “stifle innovation and violate the law.”
Continue reading: Coinbase Enters Prediction Markets as the Amazonification of Financial Platforms Gathers Pace
Grewal drew a sharp line between prediction markets
and traditional sportsbooks, arguing that “casinos win only if you lose and set
odds to maximize their profits,” while “prediction markets are neutral
exchanges, indifferent to price, that match buyers and sellers.”
States Push Back as Industry Tensions Rise
Coinbase’s Illinois filing states that it brought the
case to stop officials from “unlawfully applying Illinois gambling laws to
federally regulated transactions” that it says fall under the CFTC’s exclusive
jurisdiction.
“Prediction markets are fundamentally different from sportsbooks. 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,” Grewal argued.
Coinbase recently announced that it is entering the prediction markets business through a partnership with Kalshi, extending its
offering beyond traditional crypto trading.
Coinbase is not the only firm targeting prediction
markets, as Robinhood has already developed a rapidly growing business in this
area through its partnership with Kalshi.
This article was written by Jared Kirui at www.financemagnates.com.
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