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Multi-State Lawsuit: Coinbase has filed lawsuits against Michigan, Illinois, and Connecticut, seeking to stop state gaming regulators from policing prediction markets.
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Jurisdiction Dispute: Coinbase argues that prediction markets fall under the exclusive authority of the federal Commodity Futures Trading Commission (CFTC), not state gambling laws.
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Product Launch: The legal move follows Coinbase’s partnership with Kalshi to offer event-contract trading to U.S. customers starting in January 2026.
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Innovation vs. Regulation: Chief Legal Officer Paul Grewal claims state-level bans create a "regulatory chaos" that stifles innovation and falsely equates neutral exchanges with casinos.
Defending Federal Oversight
Coinbase has escalated its legal battle against state regulators, filing three separate lawsuits against officials in Michigan, Illinois, and Connecticut. The exchange is seeking declaratory and injunctive relief to confirm that prediction markets are financial derivatives governed by the Commodity Futures Trading Commission (CFTC). Coinbase maintains that states lack the authority to intervene in these markets, which Congress has already placed under federal remit.
Markets vs. Gambling
At the heart of the dispute is the classification of event-based contracts. While states like Connecticut have issued cease-and-desist notices alleging unlicensed sports betting, Coinbase argues that prediction markets are fundamentally different from sportsbooks. CLO Paul Grewal noted that whereas casinos set odds to maximize profit from customer losses, prediction markets act as neutral exchanges that match buyers and sellers to discover the "price" of real-world outcomes.
Paving the Way for Kalshi
The timing of the lawsuits is strategic, coming just one day after Coinbase announced it would integrate Kalshi into its app. Starting in January 2026, Coinbase plans to offer event contracts—including those tied to sports and economic data—to millions of U.S. retail users. By challenging the states now, Coinbase aims to prevent a fragmented regulatory landscape where its new product could be blocked on a state-by-state basis.
