Coinbase, a large cryptocurrency exchange, has filed lawsuits against Illinois, Michigan, and Connecticut. The company is fighting state government efforts to control prediction markets. It also wants the federal court to clearly explain which authority is in charge of overseeing these markets.
In these lawsuits, Coinbase is asking for declaratory and injunctive relief. This means they want the courts to confirm that prediction markets are regulated by the Commodity Futures Trading Commission (CFTC). CFTC is a federal agency. Coinbase argues that state gaming regulators should not have control over prediction markets.
Who is In Charge of Prediction Markets?
Coinbase explained that federal law gives the CFTC the authority to regulate prediction markets. This prevents states from controlling or banning them under gambling laws. Coinbase is getting ready to enter the prediction markets industry. They are partnering with Kalshi, a platform regulated by the CFTC, to bring event-based contract trading to the U.S. by January 2026.
The company warned that if states interfere, it could cause serious harm by stopping some users in certain areas from accessing federally regulated products. Coinbase is responding to moves by states that want to classify event contracts, like those tied to sports results, as illegal gambling unless companies get betting licenses from the state.
Coinbase believes this conflicts with federal commodities law. They highlighted that Congress gave the CFTC wide control over derivatives and commodities. Exceptions are very limited and do not include sports events. Because of this, Coinbase insists that sports-related event contracts must be overseen by federal authority.
How Prediction Markets are Different
Coinbase also pointed out the differences between prediction markets and traditional sports betting. In a sportsbook, a casino sets the odds and makes money when customers lose. However, prediction markets are neutral platforms. They just connect buyers and sellers without taking sides or risks.
Paul Grewal, Coinbase’s Chief Legal Officer, tweeted about the lawsuits. He said, “We’re right on the law and the facts. And we will prove it.”
Growing Interest in Prediction Markets
The lawsuits come at a time when prediction markets are becoming more popular. Platforms like Kalshi and Polymarket have handled billions of dollars in trading recently. This has drawn more attention from regulators.
Earlier this month, Connecticut took action against some companies offering event-based contracts. The state issued “cease-and-desist” orders, demanding them to stop. This led to legal challenges and temporary halts in their enforcement.
Future of Prediction Markets
Despite these challenges, prediction markets are seeing growth and new opportunities. New product launches in 2025 show potential for broader use. The CEO of Robinhood, Vlad Tenev, recently shared an optimistic view. He called this time the beginning of a ‘prediction market supercycle.’ He believes trading activity could grow a lot as platforms use blockchain technology to price real-world outcomes.
The post originally appeared on CryptoPotato.