Coinbase Sues Illinois, Michigan, and Connecticut Over Prediction Market Crackdown
Coinbase has filed lawsuits in opposition to Illinois, Michigan, and Connecticut, whereas difficult state efforts to control prediction markets and asking federal courts to make clear who has oversight authority.
In its filings, the crypto trade is searching for declaratory and injunctive reduction, arguing that prediction markets fall below the unique jurisdiction of the Commodity Futures Trading Commission (CFTC) quite than state gaming regulators.
Who Controls Prediction Markets?
The firm acknowledged that federal legislation already assigns regulatory authority for these merchandise to the CFTC, which leaves states with out the ability to limit or prohibit them below playing statutes. The lawsuits come as Coinbase prepares to enter the prediction markets house via a partnership with Kalshi, a CFTC-regulated platform, and plans to roll out event-based contract buying and selling throughout the US beginning in January 2026.
Coinbase warned in courtroom filings that state intervention may trigger fast and “irreparable hurt” by blocking entry to federally regulated merchandise in sure jurisdictions. The firm is responding to actions by a number of states which have sought to categorise occasion contracts, significantly these linked to sports activities outcomes, as unlawful playing until operators receive state-issued betting licenses.
According to the crypto trade, this interpretation conflicts with federal commodities legislation. The trade mentioned that Congress granted the CFTC broad authority over derivatives and commodities, with solely a restricted set of exclusions that don’t embody sporting occasions. As such, Coinbase added that sports-related occasion contracts stay topic to federal oversight.
The firm has additionally highlighted the variations between prediction markets and conventional sportsbooks. Unlike casinos, which set odds and revenue from buyer losses, prediction markets perform as impartial venues that match consumers and sellers with out taking directional threat.
Coinbase’s Chief Legal Officer, Paul Grewal, tweeted
“We’re proper on the legislation and the info. And we’ll show it.”
The lawsuits arrive amid rising scrutiny from state regulators as prediction markets have surged in reputation. Platforms comparable to Kalshi and Polymarket have generated billions of {dollars} in buying and selling quantity over the previous yr and have drawn elevated regulatory consideration in consequence.
Earlier this month, Connecticut regulators issued cease-and-desist orders in opposition to a number of firms providing event-based contracts, triggering authorized challenges and short-term pauses on enforcement.
Prediction Markets Boom
Regulatory woes apart, the sector has additionally seen contemporary momentum in 2025 from new product launches, reinforcing expectations of broader adoption. Robinhood CEO Vlad Tenev just lately predicted important long-term progress for crypto-based prediction markets. The exec even described the sector as getting into the early phases of a “prediction market supercycle.”
Tenev mentioned adoption and buying and selling volumes may increase dramatically as platforms more and more worth real-world occasions utilizing blockchain infrastructure.
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