Coinbase Follows Kalshi’s Lead, Sues Three States Over Prediction Markets
Coinbase just fired a legal shot across the bow of state regulators—and it's using Kalshi's playbook.
The Strategy: Sue First, Ask Questions Later
Forget gentle lobbying. The crypto giant is taking a page directly from prediction market platform Kalshi, which has been aggressively challenging regulatory boundaries. When faced with resistance, the new move is litigation. Coinbase isn't just asking for permission anymore; it's going to court to demand it.
Why Prediction Markets Are the New Battleground
This isn't about Bitcoin or Ethereum trading. It's about the next frontier: event contracts. Think political elections, economic indicators, even weather outcomes. These markets turn information into a tradeable asset, and traditional finance hates that—it bypasses their precious analysts and proprietary data feeds. It's a direct threat to the old guard's information monopoly, which is probably why the pushback is so fierce. (Nothing gets a regulator moving faster than a threat to Wall Street's lunch money.)
The Legal Gambit
By suing three states simultaneously, Coinbase is testing the waters on a national scale. A win in one jurisdiction could create a domino effect, forcing other states to reconsider their stance. It's a high-risk, high-reward maneuver that signals the industry's patience with a patchwork of contradictory state laws is wearing thin.
The message is clear: crypto is done playing defense. The era of asking nicely is over. Now, it's about carving out space in the financial system by force—of law.
Coinbase is pushing back against state-level resistance as it moves deeper into prediction markets, filing lawsuits against regulators in Connecticut, Illinois, and Michigan. At stake is a much larger question than one company’s product launch: who gets to regulate prediction markets in the United States, and whether they are treated as financial instruments or gambling activities.
Coinbase Draws a Line on Regulation
Coinbase’s Core argument is straightforward. Prediction markets listed on platforms overseen by the Commodity Futures Trading Commission should be regulated under federal commodities law, not state gambling statutes. The exchange says Congress has already spoken on this issue through the Commodity Exchange Act, which grants the CFTC exclusive authority over derivatives such as event contracts.
In a public statement, Coinbase’s Chief Legal Officer, Paul Grewal, states that attempts to step in create a regulatory clash that threatens national consistency. If each state applies its own gambling rules, the strictest jurisdictions could effectively block federally approved products across the country. Coinbase argues this WOULD undermine the federal system and make it nearly impossible to launch new, regulated financial tools at scale.
Why Prediction Markets Are Not Gambling
A key part of Coinbase’s case is separating prediction markets from traditional betting. The company says sportsbooks and casinos profit directly from customer losses and manage odds to maximize their own returns. Prediction markets work differently. They act as neutral venues that match buyers and sellers, without taking positions on outcomes.
Because of this structure, Coinbase argues that prediction markets fit naturally within the derivatives framework. These products are subject to federal oversight, including market surveillance, position limits, and compliance requirements enforced by the CFTC. Labeling them as gambling, the company says, ignores how they actually function.
Lessons From Kalshi’s Courtroom Battles
Coinbase’s legal strategy closely follows the path taken by Kalshi, a CFTC-approved prediction market that has been fighting similar state challenges. Kalshi’s experience highlights how unsettled the regulatory landscape still is. Some courts have allowed state gaming regulators to intervene, while others have paused enforcement actions to consider federal preemption.
These mixed outcomes have left the industry in limbo. Coinbase’s entry into the legal fight raises the stakes, increasing pressure on federal courts to clearly define whether prediction markets belong under commodities law or state gambling oversight.
Why the Outcome Matters Beyond Coinbase
The lawsuits could have wide-reaching implications for crypto and financial innovation in the U.S. A ruling in Coinbase’s favor would reinforce the CFTC’s authority and give federally regulated platforms a clearer path to operate nationwide. That clarity could unlock broader adoption of prediction markets tied to finance, economics, and real-world events.
Coinbase executive Ryan VanGrack framed the MOVE as part of a larger push for consistent rules. He said prediction markets are federally regulated derivatives by design, and state efforts to pull them under local control risk fragmenting oversight. Much like crypto itself, Coinbase believes uniform federal rules are essential to protect consumers while allowing innovation to move forward.
