Coinbase has filed lawsuits against regulators in Connecticut, Illinois, and Michigan, seeking a federal court ruling that prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state-level gaming authorities.
The move opens a new legal front in the ongoing debate over whether event-based contracts should be treated as financial instruments or gambling products.
In court filings submitted on Monday, Coinbase asked judges to confirm that prediction markets offered on a CFTC-regulated platform are governed by federal commodities law under the Commodity Exchange Act (CEA).
The exchange argues that allowing individual states to regulate or block such markets would undermine federal authority, create regulatory fragmentation, and stifle innovation in U.S. financial markets.
Coinbase contends that some states have wrongly classified prediction markets, particularly those linked to sporting events, as gambling.
According to the company, Congress intentionally limited the scope of excluded commodities to a narrow list, such as onions and motion picture box office receipts, signaling that all other underlying subjects, including sports outcomes, fall within the CFTC’s regulatory mandate.
In a public statement, Coinbase emphasized that prediction markets are structurally different from traditional sportsbooks or casinos. While casinos profit when customers lose and actively set odds to maximize house returns, prediction markets function as neutral exchanges that simply match buyers and sellers.
Prices are determined by market demand rather than by an operator seeking a wagering edge.
The lawsuits reflect Coinbase’s broader effort to secure federal regulatory clarity as it plans to expand into prediction markets through platforms overseen by the CFTC.
A favorable ruling could strengthen the role of federal regulators in overseeing event-based contracts and limit the ability of individual states to impose their own gambling laws on such products.
State regulators named in the lawsuits have not yet publicly responded. The outcome of these cases could have wide-ranging implications for how prediction markets operate in the United States, potentially shaping the future of event-based financial products and defining the boundary between regulated finance and gambling under U.S. law.