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Coinbase has taken its fight over prediction markets into federal court, filing lawsuits against Michigan, Illinois, and Connecticut.
The company argues that these states are exceeding their authority by attempting to control contracts that, under federal law, fall within the jurisdiction of the Commodity Futures Trading Commission (CFTC).
The suits were filed on December 18, with Coinbase’s Chief Legal Officer, Paul Grewal, sharing details of the Illinois case on social media. According to Bloomberg, the company said the three states had either acted against or threatened to act against operators, despite lacking the legal power to do so.
Coinbase hopes to establish once and for all that state gaming boards cannot interfere with federally registered exchanges.
Coinbase to enter prediction market in 2026
Coinbase’s legal battle with state regulators comes just as the company prepares to launch its own prediction market offering.
The exchange announced earlier this week that it will partner with Kalshi, a platform already regulated by the Commodity Futures Trading Commission (CFTC), to provide event‑based contract trading to U.S. customers beginning in January 2026. Illinois is among the states where the platform is expected to launch.
Chief Legal Officer Paul Grewal explained that the lawsuits are designed to settle what Coinbase sees as a clear matter of law. “Prediction markets fall squarely under the jurisdiction of the CFTC, not any individual state gaming regulator,” he wrote on X. Grewal added that attempts by states to block or control these markets “undermine innovation and conflict with federal law.”
Coinbase warns of damage to its overall business
Court filings in Illinois warn that state officials continuing to interfere could cause “immediate and irreparable” harm to Coinbase’s business. The company is asking for both declaratory and injunctive relief to stop enforcement actions while the courts review the issue.
As it has been for months, the main issue revolves around how prediction markets should be classified. Several states argue that contracts tied to outcomes such as sports events can be classified as unlicensed betting, placing them under state gambling laws.
Coinbase, like other prediction market operators, rejects that view, arguing the markets function as neutral exchanges where buyers and sellers meet, rather than as sportsbooks setting odds for profit.
Grewal also pointed to Congress’s definition of commodities, noting that lawmakers excluded only a narrow set of items, such as onions and box office receipts, from CFTC oversight. “By that logic,” he said, “sports‑related event contracts remain within the agency’s remit.”
10 states now involved in prediction markets battle
With the latest Coinbase filings, the prediction markets dispute has widened. What started as cease and desist orders from a few regulators has now spread to ten states.
Illinois and Michigan joined the list with Coinbase’s latest filings, while Connecticut is already locked in litigation with Kalshi. Other states in the mix include Maryland, New Jersey, Ohio, Nevada, Massachusetts, and New York.
The fight has even extended beyond state regulators, with Native American tribes pursuing their own lawsuits against prediction market operators in California and Wisconsin.
Coinbase’s complaint warns that if each state is allowed to regulate these products separately, the result would be a broken system that runs against Congress’s intent. “Permitting States like Illinois to encroach on the CFTC’s jurisdiction would frustrate Congress’s efforts to guarantee nationwide uniformity in the futures market,” Coinbase stated.
Source: Cybernews
