Coinbase Challenges State Authority in Prediction Market Fight

Coinbase Global just picked a fight that cuts to the core of how prediction markets should work in the United States. Instead of quiet talks with regulators, the crypto exchange chose courtrooms. The goal stays simple but loaded with consequences: decide who really controls prediction markets before states set the rules on their own.

Good to Know

• Coinbase filed lawsuits against Michigan, Illinois, and Connecticut at the same time
• The dispute centers on federal CFTC authority versus state gaming laws
• Prediction markets now cover sports, politics, and economic outcomes

A Legal Line in the Sand

Coinbase Global filed lawsuits against Michigan, Illinois, and Connecticut, claiming those states overreached by trying to regulate prediction markets. The exchange argues federal law already settles the issue.

According to Coinbase, Congress gave the Commodity Futures Trading Commission full authority over these markets. State action, in that view, creates conflict with federal oversight and adds confusion for companies operating nationwide.

Rather than wait for enforcement actions to pile up, Coinbase asked courts to confirm a clear boundary. State regulators, the company says, should not interfere with CFTC jurisdiction.

Prediction markets allow users to trade contracts tied to future outcomes. Sports results, economic data releases, and political events all fall into the mix. Interest climbed fast over recent months as more platforms added access and liquidity improved.

Coinbase already signaled plans to enter the sector as part of a broader diversification push. The product relies on a non exclusive integration with Kalshi, another operator already locked in disputes with state regulators.

That timing matters. States moved quickly as popularity grew, while federal agencies continued to frame prediction markets as derivatives rather than gambling products.

States Push Back Hard

State regulators and casino interests frame prediction markets differently. From their angle, trading on sports and real world outcomes looks a lot like wagering. Under that logic, state gaming laws should apply, along with licensing and consumer protections.

Michigan, Illinois, and Connecticut each took steps that Coinbase views as enforcement creep. The lawsuits push back on that approach directly instead of challenging individual penalties later.

Other platforms already felt similar pressure. Robinhood and Crypto.com both faced legal challenges tied to prediction market offerings. Coinbase now aims to reset the field with a single federal answer.

FAQ

What does Coinbase want from the courts?

Coinbase seeks court orders confirming that only the CFTC can regulate prediction markets at the federal level.

Why are states involved at all?

States argue prediction markets resemble gambling and should fall under local gaming laws and enforcement powers.

Where does Kalshi fit into the dispute?

Coinbase plans to offer prediction markets through a non exclusive integration with Kalshi, which already faces state level challenges.

Could the Supreme Court review the issue?

Conflicting lower court rulings increase the chance of a Supreme Court case if appeals continue.