Coinbase Declares War on State Regulators, Asserts Prediction Markets Should Fall Under CFTCs Jurisdiction

Coinbase has initiated legal action against the authorities of Michigan, Illinois, and Connecticut. The exchange argues that the regulation of prediction markets falls under the jurisdiction of the CFTC rather than local gambling oversight agencies.

The company’s chief legal officer, Paul Grewal, asserts that the U.S. Congress has designated the CFTC as the sole regulatory body for this sector, and thus states lack the authority to interfere with such platforms.

Grewal remarked, «Regional efforts to regulate or block these markets stifle innovation and violate the law.»

In its lawsuit, Coinbase emphasized that local authorities’ intervention would cause «irreparable harm» to the business.

Grewal pointed out that regulators mistakenly equate sports betting with gambling. According to him, Congress has narrowly defined «commodity» to exclude only a limited set of assets like bows and box office collections. All remaining categories, including sporting events, fall under the purview of the CFTC.

A Coinbase representative also clarified the fundamental distinction between prediction markets and traditional bookmakers: «Casinos profit only when you lose and set odds to maximize their profit. Prediction markets are neutral exchanges that bring buyers and sellers together.»

Just a day earlier, the exchange announced a partnership with the regulated platform Kalshi, which aims to provide U.S. clients access to trading event contracts in January 2026.

The prediction market sector has seen significant interest from the industry in 2025.

Earlier this month, Trust Wallet, owned by Changpeng Zhao, integrated a feature for engaging in prediction markets, and later, the founder of Binance introduced a new platform, predict.fun, on the BNB Chain blockchain.

This growing segment has also attracted companies like Robinhood and MetaMask, the latter of which added perpetual contract trading through Hyperliquid.

To recall, in November, Galaxy founder Mike Novogratz revealed that his company was in talks with Polymarket and Kalshi to provide market-making services.