Coinbase Challenges State Regulators Over Prediction Markets

Coinbase challenges state regulators over prediction markets.

Coinbase has filed lawsuits against the authorities in Michigan, Illinois, and Connecticut. The exchange asserts that the regulation of prediction markets falls under the jurisdiction of the CFTC, rather than local gambling oversight bodies.

Today @coinbase filed lawsuits in CT, MI, and IL to confirm what is clear: prediction markets fall squarely under the jurisdiction of the @CFTC, not any individual state gaming regulator (let alone 50). State efforts to control or outright block these markets stifle innovation…

— paulgrewal.eth (@iampaulgrewal) December 19, 2025

The company’s chief legal officer, Paul Grewal, argues that the U.S. Congress has appointed the Commodity Futures Trading Commission as the sole regulatory body for this sector. Therefore, states lack the authority to interfere with the operation of such platforms.

“Regional efforts to control or block these markets stifle innovation and violate the law,” Grewal stated.

In its lawsuit, Coinbase emphasized that local authorities’ interference would cause the business “irreparable harm.”

Grewal noted that regulators mistakenly equate sports betting with gambling. According to him, Congress excluded only a narrow list of assets, such as onions and box office receipts, from the definition of “commodity.” All other categories, including sporting events, fall under the CFTC’s responsibility.

A Coinbase representative also explained the fundamental difference between prediction markets and bookmakers:

“Casinos only win when you lose and set odds to maximize their profit. Prediction markets are neutral exchanges, bringing together buyers and sellers.”

The day before, the exchange announced a partnership with the regulated platform Kalshi. The exchange plans to offer U.S. clients access to event contract trading in January 2026.

In 2025, the industry showed significant interest in the prediction markets sector. 

Earlier this month, Trust Wallet, owned by Changpeng Zhao, introduced an option for participating in prediction markets, and later the Binance founder launched a new platform, predict.fun, on the BNB Chain blockchain. 

The growing segment also attracted Robinhood and MetaMask.

Back in November, Galaxy founder Mike Novogratz revealed that the company is in talks with Polymarket and Kalshi to provide market-making services.