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Cryptocurrency exchange Coinbase filed lawsuits in Connecticut, Illinois, and Michigan this week to stop the states from applying local gambling laws to prediction markets.
In an X thread yesterday evening, Dec. 18, Coinbase’s chief legal officer Paul Grewal said the company believes these markets should fall under the Commodity Futures Trading Commission’s (CFTC) federal oversight, not state gaming regulators. “State efforts to control or outright block these markets stifle innovation and violate the law,” Grewal wrote.
Coinbase's CLO emphasized that prediction markets differ from casinos, noting that while casinos win only if players lose and set odds to maximize profits, prediction markets “are neutral exchanges, indifferent to price, that match buyers and sellers.”
Earlier this week, Coinbase confirmed previously announced plans to offer predictions markets within its main app, part of a suite of new offerings, including stock trading and a tokenization platform for institutions.
States Take Action
Some states have tried to argue that prediction markets on sports events fall outside the CFTC’s jurisdiction. Grewal countered that Congress excluded only a few specific underliers from the definition of “commodity,” meaning most subjects, including sporting events, are under federal oversight.
The filings are getting noticed in Illinois, where both Kalshi and Robinhood, among other platforms, have already received several cease-and-decease orders alleging that the platforms are illegally offering sports betting without a state license.
The legal fight mirrors broader disputes in the U.S. over whether prediction contracts are considering derivatives or gambling. A Nevada federal court recently ruled that Kalshi must comply with state gaming laws for sports contracts, a decision the company is appealing. Other states, including Massachusetts and Maryland, are also pursuing similar actions.
As prediction market activity has exploded this year, sports betting in particular has taken center stage, with volumes surging on both Kalshi and Polymarket.
Earlier today, the Senate advanced President Donald Trump’s CFTC chair nominee, Michael Selig, to chair the commission. His confirmation comes as Congress considers legislation that could expand the agency’s authority over digital assets, including prediction markets.