Coinbase released a barrage of lawsuits against state regulators on December 18, taking aim at Illinois, Michigan, and Connecticut over their attempts to block prediction markets on its platform. Filed in the U.S. District Court for the Northern District of Illinois, the complaint mirrors arguments previously made by Kalshi, another prediction market operator caught in the regulatory crossfire.
Chief Legal Officer Paul Grewal wasted no time sharing the Illinois lawsuit on social media. The timing? Just one day after Coinbase announced its entry into prediction markets through a partnership with Kalshi. Talk about jumping straight into the deep end.
The legal battle now spans a whopping ten states, with Maryland, New Jersey, Ohio, Nevada, Massachusetts, and New York also in the mix. Native American tribes in California and Wisconsin are facing similar litigation. It’s like a nationwide game of regulatory whack-a-mole.
Coinbase’s argument is straightforward: the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts. States shouldn’t be able to call these things “gambling” when federal law says otherwise. They claim state regulations would expose them to both civil and criminal liability for federally legitimate transactions. Not exactly a fair deal.
Federal law calls them event contracts, states call them gambling—creating an impossible legal tightrope for compliant businesses.
State regulators aren’t backing down. They view these prediction markets as illegal sports wagering that requires proper gambling licenses. Illinois has already fired off cease-and-desist letters to Kalshi, Robinhood, and Crypto.com. Nevada recently sided with state interests in a similar Kalshi case.
The stakes are high. Coinbase claims it faces “irreparable harm” if forced to either risk liability or block users in these states. In its legal filing, the company highlights the urgent need for resolution of regulatory uncertainties that could impact its business operations. Their planned January 2026 launch for event-contract trading could be in jeopardy.
This legal showdown could eventually land at the Supreme Court’s doorstep. The outcome will determine whether prediction markets become a regulated financial niche or remain stuck in a patchwork of state gambling laws. Either way, Coinbase is betting big on this fight.
Grewal has publicly emphasized that prediction markets differ fundamentally from gambling as they involve price discovery mechanisms rather than pure chance-based outcomes.
