Coinbase Sues 3 States Over Prediction Market Laws

Coinbase is taking three US states to courtroom in a bid to lock in federal safety for its deliberate prediction markets, opening a brand new entrance within the battle over whether or not occasion contracts are finance or playing.

The trade has sued regulators in Connecticut, Illinois, and Michigan, asking federal judges to declare that prediction markets listed on a US Commodity Futures Trading Commission (CFTC)-regulated platform fall below the Commodity Alternate Act (CEA) and the CFTC’s claimed unique jurisdiction, not 50 separate state playing codes.

In a Friday X publish, chief authorized officer Paul Grewal mentioned Coinbase filed the circumstances “to substantiate what is obvious: prediction markets fall squarely below the jurisdiction of the @CFTC, not any particular person state gaming regulator (not to mention 50).”

Associated: (*3*)

Coinbase’s federalism problem to state playing legal guidelines

Coinbase frames the dispute as each a authorized and structural query. Courtroom filings argue that if every state can independently determine whether or not federally supervised prediction markets are unlawful playing, probably the most restrictive regime would successfully grow to be the nationwide customary, “turning our system of federalism the wrong way up.”

The corporate additionally leans laborious on the way in which Congress outlined “commodity” within the CEA, noting that lawmakers selected to carve out solely a handful of particular underliers, notably onions and “movement‑image field‑workplace receipts,” reasonably than sports activities or politics.

Grewal attracts a transparent line between Coinbase’s deliberate markets and conventional sportsbooks. Casinos and bookmakers, he argues, revenue from buyer losses and set odds to maximise their winnings. Prediction markets, he says, are impartial matching engines that pair consumers and sellers and are detached to cost.

Treating each as the identical factor, Coinbase says, wouldn’t solely misinterpret the statute but in addition smother a federally regulated product that’s alleged to reside contained in the derivatives framework, with CFTC surveillance and place limits.

Associated: Coinbase adds stock trading, prediction markets in ‘everything app’ push

Kalshi’s combined document reveals what’s at stake for prediction markets

Kalshi, which already operates as a CFTC‑designated contract marketplace for occasion contracts, has been testing that idea in courtroom for nearly a yr. It has sued or been sued in no less than six states over whether or not its sports activities and occasion markets are CFTC‑regulated derivatives or unlicensed playing.

Outcomes to this point are combined. In Nevada and Maryland, judges have held that Kalshi is topic to state gaming oversight regardless of its CFTC standing, whereas in New Jersey and, extra not too long ago, Connecticut, federal courts have granted the corporate temporary protection from enforcement whereas they weigh broader injunctions. Massachusetts, in the meantime, has sued to block Kalshi’s sports products, with an injunction choice not anticipated till early 2026.

With Coinbase now successfully adopting Kalshi’s pre‑emption playbook, the mixed docket might pressure federal courts to reply the core query each companies have been circling. Are US prediction markets going to be handled as regulated monetary devices below the CEA, or as playing merchandise that reside or die below state regulation?