Prediction market operator Coinbase has filed legal action against three state gambling regulators across Connecticut, Michigan and Illinois - reiterating that it does not lie under their regulatory jurisdiction.
Underlined as part of Coinbase's suit are a number of pillars upon which the operator has built its legal argument, the primary of which argues that events contracts - or derivatives - are financial instruments that provide "valuable investment opportunities," as well as having consequential effects relative to economic political and commercial events. Elsewhere, the suit leans on the common and crucial argument that prediction markets fall under the exclusive federal regulatory jurisdiction of the Commodity and Futures Trading Commission (CFTC).
Indeed, the legal arguments also presents the conclusion that events contracts are federally recognized as 'swaps,' meaning they must adhere to certain regulatory frameworks existent outside of the frameworks specified by gambling regulators.
Finally, Coinbase argues that its request for relief from its ongoing battles with the gambling regulators of these three given states stems from the fact that federal law should govern the company's operations and that it is already subject to a set of comprehensive regulatory requirements as per its independent sector that is, supposedly, liberated entirely from gambling.
Speaking via X (Twitter), Coinbase's Chief Legal Officer Paul Grewal said: "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 and violate the law.
"Some states think prediction markets fall outside the CFTC's jurisdiction when they relate to sports. But Congress deliberately chose to exclude only a handful of specific underliers - including 'onions' and 'motion picture box office receipts' - from the definition of 'commodity.' This makes clear that all other subjects (including sporting events) fall within the CFTC's scope."
Also pointed to as part of the suit is Coinbase's recently announced partnership with Kalshi - whom Coinbase's events contracts are offered through - as the operator points out that Kalshi is also a CFTC-approved organization that has been listing contracts for some time.
This time last year, sports events contracts in the US were virtually non-existent, as Kalshi began offering the contracts in January 2025
