Coinbase sues Michigan, Illinois and Connecticut over prediction market oversight

Coinbase has sued the U.S. states of Michigan, Illinois, and Connecticut, intensifying an ongoing legal dispute over state authority to regulate prediction markets.

The lawsuits, filed Thursday, seek court orders affirming that prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission rather than state gaming regulators.

Coinbase argued that Congress has already designated the CFTC as the sole regulator for such prediction markets, leaving states without authority to intervene.

“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),” Coinbase Chief Legal Officer Paul Grewal said in a Thursday post on X. “State efforts to control or outright block these markets stifle innovation and violate the law.”

Coinbase called for declaratory and injunctive relief in its filing in Illinois, saying that state intervention would cause it to suffer “immediate and irreparable” harm.

Some states have falsely argued that prediction markets tied to sports fall outside the CFTC’s jurisdiction, Grewal said, pointing out that Congress excluded only a narrow set of underliers — such as “onions” and “motion picture box office receipts” — from the definition of a commodity. This signals that all other subjects, including sporting events, fall within the agency’s remit, according to the Coinbase executive.

“Prediction markets are fundamentally different from sportsbooks,” Grewal said. “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.”

Coinbase-Kalshi

The legal action follows Coinbase’s announcement a day earlier that it will enter the prediction markets sector through a partnership with Kalshi, a CFTC-regulated prediction markets platform.

“Beginning in January 2026, Coinbase will offer event-contract trading to its customers throughout the United States, including in Illinois,” the company said in its Illinois court filing.

The sector has surged in popularity over the past year, with Kalshi and Polymarket drawing billions of dollars in trading volume, but that growth has also triggered mounting pushback from state authorities.

Several states have taken enforcement action against prediction market operators, arguing that event-based contracts — particularly those tied to sports outcomes — constitute illegal gambling unless licensed under state law.

Earlier this month, Connecticut state regulators issued cease-and-desist notices to Kalshi, Robinhood and Crypto.com, alleging they were offering unlicensed sports betting products. Kalshi responded by filing suit against Connecticut authorities and secured temporary relief after a federal judge ordered the state to pause enforcement while the court considers the case.