The post Coinbase Sues 3 States Over Prediction Market Laws appeared on BitcoinEthereumNews.com. Coinbase is taking three US states to court in a bid to lock inThe post Coinbase Sues 3 States Over Prediction Market Laws appeared on BitcoinEthereumNews.com. Coinbase is taking three US states to court in a bid to lock in

Coinbase Sues 3 States Over Prediction Market Laws

3 min read

Coinbase is taking three US states to court in a bid to lock in federal protection for its planned prediction markets, opening a new front in the battle over whether event contracts are finance or gambling.

The exchange 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 under the Commodity Exchange Act (CEA) and the CFTC’s claimed exclusive jurisdiction, not 50 separate state gambling codes.

In a Friday X post, chief legal officer Paul Grewal said Coinbase filed the cases “to confirm what is clear: prediction markets fall squarely under the jurisdiction of the @CFTC, not any individual state gaming regulator (let alone 50).”

Source: Paul Grewal

Related: Coinbase appoints former UK minister George Osborne to chair advisory council

Coinbase’s federalism challenge to state gambling laws

Coinbase frames the dispute as both a legal and structural question. Court filings argue that if each state can independently decide whether federally supervised prediction markets are illegal gambling, the most restrictive regime would effectively become the national standard, “turning our system of federalism upside down.”

The company also leans hard on the way Congress defined “commodity” in the CEA, noting that lawmakers chose to carve out only a handful of specific underliers, notably onions and “motion‑picture box‑office receipts,” rather than sports or politics.

Coinbase filing against Michigan. Source: Court Listener

Grewal draws a clear line between Coinbase’s planned markets and traditional sportsbooks. Casinos and bookmakers, he argues, profit from customer losses and set odds to maximize their winnings. Prediction markets, he says, are neutral matching engines that pair buyers and sellers and are indifferent to price.

Treating both as the same thing, Coinbase says, would not only misread the statute but also smother a federally regulated product that is supposed to live inside the derivatives framework, with CFTC surveillance and position limits.

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

Kalshi’s mixed record shows what’s at stake for prediction markets

Kalshi, which already operates as a CFTC‑designated contract market for event contracts, has been testing that theory in court for almost a year. It has sued or been sued in at least six states over whether its sports and event markets are CFTC‑regulated derivatives or unlicensed gambling.

Outcomes so far are mixed. In Nevada and Maryland, judges have held that Kalshi is subject to state gaming oversight despite its CFTC status, while in New Jersey and, more recently, Connecticut, federal courts have granted the company temporary protection from enforcement while they weigh broader injunctions. Massachusetts, meanwhile, has sued to block Kalshi’s sports products, with an injunction decision not expected until early 2026.

With Coinbase now effectively adopting Kalshi’s pre‑emption playbook, the combined docket could force federal courts to answer the core question both firms have been circling. Are US prediction markets going to be treated as regulated financial instruments under the CEA, or as gambling products that live or die under state law?

Source: https://cointelegraph.com/news/coinbase-sues-states-prediction-markets?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound

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