Coinbase takes three states to court, aiming to secure a federal regulatory pathway for prediction markets and preempt state-level gambling laws.
Coinbase has filed lawsuits against financial regulators in Michigan, Illinois, and Connecticut, launching an aggressive preemptive challenge to prevent states from regulating its planned prediction market products.
The legal filings seek court orders to affirm that prediction markets are commodities, placing them under the exclusive jurisdiction of the federal Commodity Futures Trading Commission (CFTC), not state-level gaming and gambling laws.
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
“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,” he added.
Coinbase stock (COIN) showed a muted reaction, trading at $239.83, down 1.79% on the day. The exchange plans to launch the new products, powered by CFTC-regulated platform Kalshi, to its US customers starting in January 2026.
This offensive legal posture mirrors the strategy of its partner Kalshi, which is engaged in its own multi-state litigation to assert CFTC authority over state gaming commissions. Just last week, Connecticut issued cease-and-desist orders to Kalshi and others, classifying their sports-related markets as illegal gambling. Coinbase, Kalshi, Robinhood, and others recently formed the Coalition for Prediction Markets to advocate for a unified federal regulatory framework.
The Institutional Take
This is a calculated offensive to establish a federal regulatory moat. By suing first, Coinbase aims to force a definitive ruling on federal preemption, seeking to avoid the costly and fragmented state-by-state licensing battles that have plagued other crypto products.
A victory for Coinbase could create a clear, CFTC-governed pathway for launching novel derivatives and event contracts nationwide. A loss would entrench the authority of state gaming commissions, significantly increasing compliance friction and market fragmentation for any US-based exchange looking to innovate beyond simple spot trading.
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