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Coinbase has filed lawsuits against Michigan and Connecticut for market regulation.
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Exchange seeks court order stating that prediction markets are under CFTC only.
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Chief legal officer states that state intervention will cause immediate irreparable damage.
Coinbase filed lawsuits against Michigan, Illinois and Connecticut on Thursday, escalating the legal dispute over state authorities to regulate prediction markets. The exchange is seeking court orders affirming prediction markets are under the exclusive jurisdiction of the Commodity Futures Trading Commission and not state gaming regulators.
Coinbase argued Congress designated the CFTC to be the sole regulator of prediction markets, leaving the states without the authority to intervene. Chief Legal Officer Paul Grewal said on X that the CFTC is the sole regulator of prediction markets, and not individual state gaming regulatory agencies.
Exchange Requests Declaratory Relief and Injunctive Relief
Exchange Requests Declaratory Relief and Injunctive Relief
In its Illinois filing, Coinbase sought declaratory and injunctive remedies, stating that the state’s intervention would cause immediate harm and irreparable damage to the company. The exchange asked courts to confirm that federal regulations override state regulations.
Grewal said that state efforts to block or control these markets stifle the innovation and violate federal laws. According to the legal officer, some states have falsely argued prediction markets linked to sports are outside CFTC’s jurisdiction.
Congress excluded a small set of assets from the definition of commodities, including onions and motion pictures box office receipts. Grewal explained that this means all other topics, including sporting events are within the CFTC’s regulatory scope.
The exchange executive stressed that prediction markets work fundamentally differently than sportsbooks. Casinos make money only when their customers lose. They set odds to maximize their profits. Prediction markets are neutral exchanges that match buyers and vendors.
Coinbase Expands through Kalshi Integration
Coinbase’s expansion into prediction markets via integration with Kalshi has led to the lawsuits. The exchange announced its plans to power prediction market via the Kalshi partnership, as part of its “everything” strategy to become a “everything exchange.”
Coinbase will soon offer commission-free trading for stocks and ETFs, Solana DEX through Jupiter integration, custom stablecoins and expanded payment services. The company wants to keep users on the platform for both centralized activity and onchain.
Coinbase is expanding its services in many ways, and the prediction market integration represents just one of them. The exchange is expanding its services to include AI tools via Coinbase Advisor, Business Banking via Coinbase Business and deeper onchain capabilities with Base App. The lawsuits challenge the state’s regulatory authority over a segment of the market that Coinbase considers critical to its expansion plan.
Related: India Approves Coinbase Investment on CoinDCX Exchange
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