Coinbase, one of the world’s leading cryptocurrency exchanges, has taken a bold stance by filing federal lawsuits against the states of Connecticut, Michigan, and Illinois regarding the regulation of prediction markets. The company is asserting that these markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) and not individual state gaming regulators, a move that could significantly influence the future of the prediction market industry.
The Conflict Between State and Federal Jurisdiction
These legal actions come as Illinois, Michigan, and Connecticut attempt to block certain prediction markets, citing state laws that pertain to sports wagering and gambling activities. In Illinois, for example, the Gaming Board issued cease-and-desist orders in April 2025 to platforms such as Kalshi, Robinhood, and Crypto.com for alleged violations of the Illinois Sports Wagering Act. Coinbase, however, argues that Congress has explicitly granted the CFTC authority over markets of this kind, with only a few exceptions (like onions and movie box office receipts).
Paul Grewal, Coinbase’s Chief Legal Officer, explained in a recent tweet: “State efforts to control or outright block these markets stifle innovation and violate the law.”
Coinbase’s Vision for Prediction Markets
Coinbase is preparing to launch its prediction market platform in January 2026 in collaboration with Kalshi, a CFTC-registered platform. This partnership allows users to trade event contracts based on sports, politics, weather, and more. Through this platform, Coinbase will act as an intermediary, offering users seamless access to Kalshi’s exchange.
The move signals Coinbase’s faith in prediction markets as an innovative asset class. Farokh Sarmad, President and Co-Founder of Myriad, praised Coinbase’s involvement, specifying it as “a powerful validation of prediction markets” and their potential for mainstream adoption.
What’s at Stake?
Prediction markets experienced significant growth in 2025, with companies like Kalshi reaching an $11 billion valuation. Meanwhile, emerging players such as Robinhood and Gemini have started entering the market, creating more competition. Predictions for 2026 indicate that it could be a transformative year for this industry, shifting from a duopoly into a multipolar setup fueled by innovation.
In its lawsuits, Coinbase highlights the detrimental effects of state-level enforcement on its operations. For instance, Illinois requires gambling licenses for compliance, a move that would limit Coinbase’s ability to offer nationwide services. As a platform known for its compliance, this scenario would undermine the company’s reputation and its broader ambitions in the market.
The Future of Fintech and Web3
Coinbase’s court battle signifies more than just a legal struggle over regulation—it is a stand for the rapidly growing prediction market industry. As the shift toward Web3 technologies accelerates, platforms like Kalshi and Coinbase are carving the pathway for innovative financial products to thrive within a regulated yet accessible environment.
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Stay tuned as this legal development unfolds, shaping the future of prediction markets—and crypto innovation as a whole.
