Coinbase’s Legal Gambit: Ripple CTO Backs Exchange in High-Stakes Battle Over Event Contracts

In a significant legal and regulatory maneuver, cryptocurrency exchange giant Coinbase has launched a multi-state offensive against what it views as outdated gambling laws. The company is challenging statutes in Illinois, Michigan, and Connecticut that threaten to derail its planned January 2026 launch of event contract trading. At the heart of the dispute is a fundamental classification: Coinbase, with vocal support from Ripple's Chief Technology Officer David Schwartz, argues these financial instruments are federally regulated derivatives, not gambling vehicles. This legal battle, unfolding as of late December 2025, represents a critical test for the expansion of novel crypto-based financial products in the United States. The outcome could set a precedent for how states regulate the intersection of prediction markets, derivatives, and blockchain technology, with Schwartz emphasizing that the legitimacy of such contracts depends entirely on the nature of the underlying event they reference.

Ripple CTO Weighs In on Coinbase's Legal Battle Over Event Contracts

Coinbase has initiated lawsuits in Illinois, Michigan, and Connecticut, challenging state-level gambling laws that could obstruct its planned launch of event contract trading in January 2026. The exchange contends these contracts are federally regulated derivatives, not gambling instruments—a stance supported by Ripple CTO David Schwartz, who asserts their classification hinges on the underlying event.

The legal maneuvering arrives amid heightened regulatory scrutiny of crypto derivatives and prediction markets. Coinbase's push for clarity reflects broader industry tensions as exchanges navigate conflicting state and federal frameworks. Schwartz's intervention underscores the technical nuances shaping these debates.

Prediction markets have long occupied a gray area between financial innovation and gambling. Coinbase's aggressive legal strategy signals its ambition to dominate this emerging sector, though regulatory headwinds persist. The outcome could set precedents for how crypto derivatives are treated across U.S. jurisdictions.

US Investors Grow Wary as Cryptocurrency Sentiment Sours

Coinbase, the largest US exchange by volume, serves as a barometer for retail investor sentiment—and the current reading is decidedly bearish. Analyst Michael Poppe maintains focus on Arbitrum, while Fidelity's trillion-dollar macro team paints a grim short-term outlook.

Jurrien Timmer, Fidelity's Global Macro Director, warns of approaching bear markets, projecting Bitcoin's path toward $65,000 despite long-term optimism. The asset manager's analysis suggests the four-year cycle pattern persists, with Bitcoin's October 6 peak of $126,000 mirroring historical cycles in both timing and magnitude.

Coinbase Premium's brief positive flip this month offered false hope, reverting to negative territory for over a week. This metric's sustained downturn signals deepening caution among US investors, contrasting sharply with previous cycles when supportive political and market conditions fueled rallies.

Klarna Adopts USDC for Institutional Funding via Coinbase Infrastructure

Klarna is leveraging blockchain technology to diversify its funding sources. The fintech firm will use Circle’s USDC stablecoin through Coinbase’s institutional infrastructure for short-term capital raises. This marks one of the first major integrations of stablecoin funding by a traditional financial services provider.

The arrangement allows Klarna to tap crypto-native investors while maintaining conventional funding channels. Commercial paper and deposits remain operational alongside the new USDC facility. Coinbase, which supports over 260 institutional clients in crypto, provides the rails for these transactions.

‘This creates access to capital pools that simply didn’t exist for us before,’ said CFO Niclas Neglén. The MOVE follows Klarna’s earlier experiments with blockchain, including its KlarnaUSD testnet stablecoin on Stripe’s Tempo network.