Why it matters: Ryan VanGrack, Coinbase’s VP of legal and global head of litigation, is sharpening Coinbase’s challenge to state regulators, saying they are trying to rewrite Congress’ authority over derivatives.

• Coinbase has filed lawsuits in Connecticut, Illinois, Michigan and Nevada after launching prediction markets in partnership with Kalshi.
• Some of those states issued cease-and-desist letters or public warnings, arguing sports event contracts amount to illegal gambling.
• VanGrack said those actions left customers facing “real and imminent” threats that forced Coinbase to seek clarity in federal court.

The argument: VanGrack says states are framing the issue incorrectly.

• Illinois officials argued in court that without state intervention, the markets would go unregulated due to limited CFTC resources.
• VanGrack called that claim “gaslighting,” saying the Commodity Futures Trading Commission has long overseen multi-trillion-dollar derivatives markets.
• He pointed to recent CFTC enforcement reminders around insider trading in event contracts as evidence the agency is actively policing the space.

Federal vs. state power: At the center is who gets to regulate sports-related event contracts.

• VanGrack argued the Commodity Exchange Act grants the CFTC exclusive jurisdiction over swaps and derivatives, including event contracts.
• The law contains a “special rule” allowing the CFTC — not states — to prohibit gaming event contracts on public policy grounds.
• States are attempting to carve sports contracts out of the federal definition of swaps, a reading VanGrack said is unsupported by the statute’s text or precedent.

Sports betting distinction: Coinbase says exchange-traded contracts differ fundamentally from sportsbook wagers.

• On a designated contract market like Kalshi, buyers and sellers set prices on an exchange overseen by the CFTC.
• In traditional sportsbooks, operators set odds and take the other side of the bet, a structure regulated by states.
• No one is arguing the CFTC regulates sportsbooks, VanGrack said — only that exchange-traded event contracts fall under federal derivatives law.

Bigger stakes: The dispute mirrors broader crypto fights over fragmented oversight.

• VanGrack said states retain authority over consumer protection and fraud.
• But subjecting national derivatives markets to “a patchwork of 50 regulators” would undermine investor confidence and market stability.
• Congress long ago chose a unified federal framework for derivatives, he said, and prediction markets should be treated no differently.