Coinbase Files Lawsuits Claiming State Overreach in Prediction Markets

Cryptocurrency exchange Coinbase has filed lawsuits against several states, claiming they have no authority to regulate prediction platforms that are currently licensed by the Commodity Futures Trading Commission.

Making a Federal Case

Coinbase Global recently entered the futures prediction market in collaboration with industry-leading Kalshi and will also offer its Custom Stablecoins as another expansion into the virtual marketplace. Therefore, they have now pitted themselves against the same state gaming regulators that have waged a legal battle with the prediction platforms over trading sports event contracts within their boundaries without a state license.

Coinbase has recently filed lawsuits against Michigan, Illinois, and Connecticut regarding their interference and unwillingness to observe the CFTC’s federal authority over prediction markets. Coinbase joins fellow prediction market platforms Kalshi, Robinhood, Polymarket, and Crypto.com in the fight against state gaming regulators.

The gaming authorities argue that these platforms need a license from each state to offer their sports event contracts, which compete for the same gambling dollar as the licensed online sportsbooks that pay taxes to the states in which they operate.

Prediction trading platforms are neither licensed by state gaming agencies nor do they pay state tax.

As for where these legal battles will ultimately wind up, Michael Selig, the nominee to replace Acting CFTC Chairperson Caroline Pham, has implied the CFTC will continue to take a hands-off approach if he is nominated and will let the courts decide.

Prediction Market Coalition

Kalshi and Crypto.com have founded the Coalition for Prediction Markets (CPM), which also includes Robinhood, Coinbase, and Underdog as members. The CPM’s mission statement is to “expand consumer access to safe, transparent, and integrity-driven prediction markets in the United States.”

This organization is also serving as a united front for the prediction platforms, much like the Sport Betting Alliance (SBA) is a coalition of the leading mobile sportsbooks representing their interests. The CPM also states that state gaming authorities are “pursuing regulatory capture—prioritizing control and revenue over innovation and consumer choice.”

Matt David, executive board member of the coalition and chief corporate affairs officer at Crypto.com, said, “As consumer interest accelerates and regulation evolves, this coalition will champion responsible, transparent growth to ensure the benefits of prediction markets reach the broader public.”

The battle over governance for prediction platforms continues to rage, but the early legal victories have been won by the prediction platforms. However, a recent setback at the federal level for Kalshi in Nevada may be portending that the tide is turning. Nevertheless, the platforms have been allowed to legally continue operating in all 50 states until such time as a court prohibits them.