Coinbase sues three US states over prediction market rules

Coinbase has filed lawsuits against Michigan, Illinois, and Connecticut, challenging the states’ authority to regulate prediction markets.

The US-based cryptocurrency exchange seeks court orders confirming that only the Commodity Futures Trading Commission (CFTC) has jurisdiction over these markets.

Coinbase argued that Congress has already assigned regulatory oversight of prediction markets to the CFTC, not state gaming regulators.

Chief legal officer Paul Grewal said on X that state intervention, including efforts to block prediction markets, would hinder innovation and violate federal law.

In its Illinois filing, Coinbase requested declaratory and injunctive relief, stating that state action would cause immediate and irreparable harm.

Coinbase’s legal filings reported that prediction markets, including those based on sports, fall under the CFTC’s jurisdiction, not state gaming laws.

🔗 Source: The Block

🧠 Food for thought

Implications, context, and why it matters.

State challenges may not matter if CFTC blocks the contracts Coinbase wants to offer

Coinbase filed suits that lean on federal preemption (federal law overrides conflicting state law). The Commodity Futures Trading Commission (CFTC) decides which event contracts clear, including sports and politics.
The agency can block contracts under the Commodity Exchange Act (the federal derivatives law) if it sees them as against the public interest, and it has not acted on sports despite state challenges 1. Kalshi runs a CFTC-regulated exchange for event contracts (markets that pay out when defined events occur). It sought political markets, then hit a ban a court lifted, then the agency dropped its appeal in May 2025 2. Even if Coinbase wins on preemption, the agency’s picks will decide if this model grows beyond non-gaming events.

Tech vendors need current usage data for prediction-market timing

If US event-contract trading reaches the projected size, vendors can target it. Kalshi hit $5.8 billion in monthly volume by November 2025 3. They can sell compliance and Know Your Customer (KYC). Offers can include geofencing, payment rails, plus data feeds and API trading tools.
Kalshi says weekly volume now tops $1 billion across 3,500+ markets 4. That gives a live read on demand for planning. Kalshi’s $11 billion valuation 4 and a $1 trillion yearly volume forecast for 2030 5 set the range. Vendors can use that to pick services that will gain uptake, such as liquidity provision (supplying tradable orders), risk management, or retail integration.