Coinbase (COIN), the crypto exchange that plans to add prediction markets to its platform, is filing lawsuits in Connecticut, Illinois and Michigan over states’ attempts to regulate these markets.
The company filed the lawsuit to “confirm what is clear,” legal director Paul Grewal wrote in an article on
Prediction markets allow users to speculate on events by purchasing shares in contracts linked to potential outcomes such as the winner of a boxing match or central bank interest rate decisions. Coinbase announced plans to integrate Prediction Markets on Wednesday, initially by integrating Kalshi. National gaming regulators are trying to take a tough line to prevent such services from being offered on the grounds that they constitute a form of gambling.
“State efforts to control or outright block these markets stifle innovation and violate the law,” Grewal wrote.
“Prediction markets are fundamentally different from sports betting. Casinos only win if you lose and set the odds to maximize their profits,” he added. “Prediction markets are neutral exchanges, indifferent to prices, which connect buyers and sellers.”
Markets are classified as a form of derivatives because their value depends on the outcome of a future event.
Congress deliberately excluded specific elements from its definition of a commodity, making it clear that everything else falls under the CFTC’s jurisdiction, according to Grewal.
“Coinbase brings this action to prevent Defendants from unlawfully applying Illinois gambling laws to federally regulated transactions that are subject to uniform federal law under the exclusive jurisdiction of the CFTC,” the exchange’s Illinois filing dated Dec. 18 states.
