Coinbase Borrows Kalshi’s Playbook, Sues Three States Over...

Coinbase sued regulators in Connecticut, Illinois and Michigan, arguing CFTC-regulated prediction markets should fall under federal commodities law, not state gambling rules.

Coinbase is taking three US states to court in a bid to lock in federal protection for its planned prediction markets, opening a new front in the battle over whether event contracts are finance or gambling.

The exchange has sued regulators in Connecticut, Illinois, and Michigan, asking federal judges to declare that prediction markets listed on a US Commodity Futures Trading Commission (CFTC)-regulated platform fall under the Commodity Exchange Act (CEA) and the CFTC’s claimed exclusive jurisdiction, not 50 separate state gambling codes.

In a Friday X post, chief legal officer Paul Grewal said Coinbase filed the cases “to confirm what is clear: prediction markets fall squarely under the jurisdiction of the @CFTC, not any individual state gaming regulator (let alone 50).”

Related: Coinbase appoints former UK minister George Osborne to chair advisory council

Coinbase frames the dispute as both a legal and structural question. Court filings argue that if each state can independently decide whether federally supervised prediction markets are illegal gambling, the most restrictive regime would effectively become the national standard, “turning our system of federalism upside down.”

The company also leans hard on the way Congress defined “commodity” in the CEA, noting that lawmakers chose to carve out only a handful of specific underliers, notably onions and “motion‑picture box‑office receipts,” rather than sports or politics.

Grewal draws a clear line between Coinbase’s planned markets and traditional sportsbooks. Casinos and bookmakers, he argues, profit from customer losses and set odds to maximize their winnings. Prediction markets, he says, are neutral matching engines that pair buyers and sellers and are indifferent to price.

Treating both as the same thing, Coinbase says, would not only misread the statute but also smother a federally regulated product that is supposed to live inside the derivatives framework, with CFTC surveillance and position limits.

Related: Coinbase adds stock trading, prediction markets in ‘everything app’ push

Source: CoinTelegraph