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US crypto alternate Coinbase has sued the states of Michigan, Connecticut, and Illinois in a bid to lock in federal safety for its deliberate prediction markets.
In its Thursday filings, the alternate is asking federal judges to declare that prediction markets listed on a platform regulated by the US Commodity Futures Buying and selling Fee (CFTC) fall underneath the Commodity Change Act (CEA) and the CFTC’s unique jurisdiction.
“At present, Coinbase filed lawsuits in CT, MI, and IL to verify what is obvious: prediction markets fall squarely underneath the jurisdiction of the CFTC, not any particular person state gaming regulator (not to mention 50),” the alternate’s Chief Authorized Officer Paul Grewal wrote on X.
The filings have been made only a day after Coinbase unveiled that it’ll broaden into the prediction markets area as a part of its effort to create an “the whole lot alternate.” This growth can be made doable via a partnership with Kalshi, which is a CFTC-regulated platform.
Coinbase’s filings look like pre-emptive measures in anticipation of pushback from state regulators, who’ve focused prediction markets platforms in latest months.
States Have No Authority To Intervene In Prediction Markets, Argues Coinbase
The prediction markets area has flourished this 12 months as customers rush to wager on the outcomes of quite a lot of real-world occasions spanning throughout politics, sports activities, and extra.
Polymarket and Kalshi are the preferred platforms available in the market. Up to now few months, each platforms have seen file buying and selling volumes, information from Token Terminal reveals.
Prediction markets volumes (Supply: Token Terminal)
Each Polymarket and Kalshi have introduced a sequence of strategic partnerships this 12 months as properly with corporations corresponding to Google, the UFC, and others.
Nevertheless, that development has attracted pushback from state authorities.
A number of states have taken enforcement motion towards prediction market operators, arguing that event-based contracts represent unlawful playing except licensed underneath state regulation.
Particularly, regulators have stated that prediction markets fall out of the CFTC’s jurisdiction once they relate to sports activities.
Coinbase argued that Congress has already designated the CFTC as the only regulator for prediction markets, leaving states with out authority to intervene.
Grewal stated on X that state regulators’ efforts to regulate or outright block prediction markets “stifle innovation and violate the regulation.”
“Prediction markets are essentially completely different from sportsbooks,” Coinbase’s authorized chief added.
Prediction markets are essentially completely different from sportsbooks. Casinos win provided that you lose and set odds to maximise their earnings. Prediction markets are impartial exchanges, detached to cost, that match patrons and sellers. 3/4
— paulgrewal.eth (@iampaulgrewal) December 19, 2025
“Casinos win provided that you lose and set odds to maximise their earnings. Prediction markets are impartial exchanges, detached to cost, that match patrons and sellers.”
The alternate stated that treating casinos and prediction markets platforms as the identical factor wouldn’t solely misinterpret how Congress defines “commodity” within the CEA, however would additionally smother a federally regulated product that’s imagined to reside contained in the derivatives framework, with CFTC surveillance and place limits.
Kalshi Has Been Getting Blended Outcomes Utilizing The Similar Arguments
Kalshi has been attempting to make use of the identical arguments introduced by Coinbase in court docket for almost a 12 months now, and has achieved blended outcomes.
Kalshi has both sued or been sued in not less than six states relating to whether or not its sports activities and occasion markets might be thought of unlicensed playing or are CFTC-regulated derivatives.
In Nevada and Maryland, judges have maintained that Kalshi is topic to state gaming oversight regardless of it being regulated by the CFTC. In the meantime, federal courts in New Jersey, and Connecticut have granted the corporate short-term safety from enforcement whereas broader injunctions are weighed.
Massachusetts has sued to dam Kalshi’s sports activities merchandise. An injunction resolution shouldn’t be anticipated on this occasion till early 2026.
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