Coinbase Sues Michigan, Illinois and Connecticut in Prediction Market Jurisdiction Dispute

Coinbase Global Inc. has taken its growing financial strategy to the courtroom by against the states of Michigan, Illinois and Connecticut over their attempts to regulate prediction markets under state gambling laws. The platform argues that these event-based contracts are not a form of traditional gambling but fall under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), a federal agency overviewing derivatives and futures products.

This legal offensive comes as services through a partnership with a CFTC-regulated platform ahead of a planned U.S. rollout in ahead 2026. By viewking declaratory relief from federal courts, Coinbase is attempting to prevent what it views as inconsistent state regulation that could undermine a unified legal framework for event contracts and similar products.

Coinbase Debates Federal Oversight vs. State Gambling Laws

At the heart of Coinbase’s lawsuits is a legal question on who gets to regulate prediction markets in the United States. In filings, Coinbase asserts that Congress clahead placed authority over event contracts within the Commodity platform Act, making them derivatives subject to . Under that argument, states have no legal right to treat prediction markets as gambling or apply their own gaming statutes. 

Chief Legal Officer Paul Grewal has been vocal on social media, stressing that prediction markets operate as neutral matching engines that pair purchaviewrs and tradeers, which makes it diverse from casino-style betting, where houses set odds and profit from losses. Grewal’s comments reiterate Coinbase’s stance that state interventions are legally misplaced and harmful to innovation by creating conflicting rules across jurisdictions.

However, state regulators have taken the opposite view. Michigan, Illinois and Connecticut have either threatened enforcement or taken action against firms offering event-based contracts, arguing that such products resemble gambling and must comply with local gaming regulations. 

What This Means for Crypto and the Prediction Markets

Prediction markets, which are platforms where users trade contracts tied to outcomes of future events such as elections, economic data releases, or sporting results, have surged in popularity and volume in recent years. Platforms like Kalshi and have particularly attracted billions in trading activity.

If Coinbase succeeds in securing judicial affirmation that the CFTC, not individual states, has exclusive regulatory authority, it could establish a national standard for prediction markets. It would simplify compliance for firms operating across state lines and potentially accelerate the development of regulated event contracts as mainstream financial products. 

On the other hand, if courts uphold state authority to treat prediction markets as gambling, the industry could face a series of regulations that complicate nationwide offerings. That fragmentation may push some innovation offshore or into decentralized protocols that try to sidestep local enforcement 

Ultimately, the outcomes of these cases could determine whether prediction markets develop under a cohesive federal regime or become subject to a range of localized rules.