Coinbase Sues Michigan, Illinois, and Connecticut Over Regulation of Prediction Markets
Coinbase has filed lawsuits in Michigan, Illinois, and Connecticut challenging state regulatory actions on prediction markets, asserting that these markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).
The lawsuits come following Coinbase's partnership with Kalshi to offer event-based contracts in the United States, with plans for a January 2026 rollout including Illinois. Coinbase argues that prediction markets serve as neutral exchanges matching buyers and sellers and should be regulated by the CFTC rather than state gaming regulators, emphasizing that these markets are not a form of gambling.
Conversely, the states contend that event-based contracts resemble unlicensed sports betting and thus fall within their jurisdiction. They also note that Congress excluded only a narrow list of underlying assets from CFTC oversight.
In Illinois, Coinbase seeks declaratory and injunctive relief to halt enforcement actions during the legal process, warning of potential immediate harm to its business operations. In Connecticut, regulators had previously issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com; however, Kalshi secured temporary relief that paused state enforcement while the case proceeds.
This legal action occurs amid a broader increase in prediction market activity by cryptocurrency platforms such as Gemini and PancakeSwap, reflecting rising competition in this space.
