Coinbase Global Inc. (NASDAQ:COIN) has filed lawsuits against Michigan, Illinois, and Connecticut, challenging state authority over the regulation of prediction markets.
The legal action, initiated on Thursday, seeks to establish that the Commodity Futures Trading Commission (CFTC) is the sole regulator of these markets, not individual state gaming regulators. The company argued in its court filing in Illinois that state intervention could cause “immediate and irreparable” harm to its operations.
In a post on X, Coinbase’s Chief Legal Officer, Paul Grewal, said: “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 and violate the law.”
See also: Coinbase: Analyst Slashes Price Target, Says Investors ‘Miss The Big Picture’
Why Coinbase Is Challenging State Authority
Coinbase’s lawsuits come on the heels of its announcement to enter the prediction markets sector via a partnership with Kalshi, a CFTC-regulated platform. The company plans to offer event-contract trading starting in January 2026.
Grewal further clarified that prediction markets differ from traditional sportsbooks, stating, “Prediction markets are fundamentally different from sportsbooks. Casinos win only if you lose and set odds to maximize their profits. Prediction markets are neutral exchanges, indifferent to price, that match buyers and sellers.”
The legal battle highlights the growing tension between federal and state authorities over the regulation of emerging financial technologies. States like Connecticut have already taken action against operators like Kalshi, Robinhood (NASDAQ:HOOD), and Crypto.com, issuing cease-and-desist notices for allegedly unlicensed sports betting products.
Coinbase’s legal challenge could set a precedent for how prediction markets are regulated across the U.S., potentially influencing the future landscape of this burgeoning sector.
COIN Price Action: The stock closed down about 2% at $239.20 on Thursday, having already lost 7% of its value this year, according to data from Benzinga Pro.
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