Coinbase Files Lawsuits Against US States Over Prediction Markets Regulation
Coinbase fires the opening legal salvo—taking multiple states to court over their stance on prediction markets.
The Regulatory Standoff
This isn't a polite request for clarification. The exchange is launching lawsuits, arguing state-level crackdowns stifle innovation and misapply existing laws. It's a direct challenge to the current regulatory playbook, framing prediction markets as a logical evolution of financial tools, not a fringe gambling product.
Why This Fight Matters
Prediction markets let users bet on real-world outcomes—elections, sports, even corporate earnings. Proponents see them as powerful information aggregators; regulators often see unlicensed betting. Coinbase's move signals a willingness to fight for this niche, betting that a favorable legal precedent could unlock a massive new market. It's a high-stakes gamble using lawyers instead of leverage.
The Bigger Picture: Drawing Lines in the Sand
The lawsuits cut straight to a core tension in crypto: who gets to define what an asset is, and how it can be used? By taking states to court, Coinbase isn't just defending one product—it's testing the boundaries of state versus federal authority and pushing for a more innovation-friendly interpretation of the rules. It's a classic tech move: ask for forgiveness later, but first, make the regulators sue you.
One cynical finance jab? Wall Street has been making billion-dollar bets on future events for centuries and calls it 'risk management.' Let a retail platform do it with a blockchain, and suddenly it's a regulatory emergency. Some risks, it seems, are more equal than others.
Coinbase's legal offensive could redefine the rules of the game. A win opens doors; a loss slams them shut. Either way, it forces the conversation—and that's often the first step toward changing the outcome.
Grewal dismissed a contention by the states that sports-related prediction markets are outside the jurisdiction of the CFTC. Congress did not exclude many items from the definition of a commodity. These items include onions and movie box office results. Everything else is within the jurisdiction of the CFTC.
In addition, he observed that there are differences between prediction markets and sports books, in that prediction markets are not like sports books found in casinos, which earn money because of the loss of the gamblers.
Coinbase Kalshi Prediction Market Push
Lawsuits align with Coinbase’s strategy on entering the prediction market with Kalshi under CFTC regulation. In the case filed in an Illinois court, Coinbase claims it intends to launch event-based contracts for U.S. residents, with that happening in January 2026.
Prediction markets have grown in popularity lately. Kalshi and Polymarket have recorded billions of dollars worth of trading activity. The market has encountered setbacks in various states.
State officials argue that contracts that center on events, such as those involving sporting outcomes, are illegal forms of gambling that must receive state-law authorization.
In early November, Connecticut authorities served cease-and-desist orders on Kalshi, Robinhood, and Crypto.com regarding illegal sports betting products. However, Kalshi contested the notice in court and obtained a stay of action through a federal judge.
The recent lawsuits filed by Coinbase reflect that the struggle for prediction market control is far from being over, and this has major implications for event-based contracts in the U.S. crypto and finance sectors.
