Coinbase (COIN) has launched a multi-state legal offensive to prevent local gaming regulators from shutting down the burgeoning prediction market industry. On Friday, December 19, 2025, the exchange filed lawsuits against Connecticut, Michigan, and Illinois, seeking federal court declarations that these markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state gambling boards.
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The move follows a wave of cease-and-desist orders issued by state officials to platforms like Kalshi and Robinhood (HOOD), alleging they are operating unlicensed sportsbooks. Coinbase, which plans to launch its own event-contract trading platform through a partnership with Kalshi in January 2026, argues that state interference creates “irreparable harm” by forcing a federally regulated financial product into a patchwork of 50 different local gambling codes.
Lawsuit Validates the CFTC’s Exclusive Jurisdiction over Event Contracts
The core of the Coinbase lawsuit effectively validates the federal government’s authority to regulate event contracts as financial swaps. Chief Legal Officer Paul Grewal argued in court filings that Congress deliberately granted the CFTC sole oversight of the derivatives market via the Commodity Exchange Act.
By defining “commodities” broadly and excluding only a few specific items like onions, Grewal argues that the law was designed to create one set of national rules that stops state gambling boards from interfering with financial markets.
Coinbase’s Legal Strategy Protects Prediction Markets
Coinbase’s legal strategy protects the structural integrity of prediction markets by drawing a sharp line between financial hedging and traditional betting. Grewal noted that whereas a casino or sportsbook only wins when a customer loses, prediction markets are neutral exchanges that simply match buyers and sellers at a transparent market price.
This distinction is critical to the company’s argument that event contracts are tools for price discovery and risk management, rather than predatory gaming products designed to maximize “house” profits.
Lawsuit Defends Industry Against Regulators Setting the National Policy
The lawsuit defends the industry against what Grewal calls an “upside-down” version of federalism where the most restrictive state regulators could effectively set national policy. If Connecticut or Illinois can unilaterally ban a federally cleared contract, Coinbase warns that innovation in the U.S. will be stifled by a “regulatory nightmare”. The exchange is asking for immediate injunctive relief to pause state enforcement actions while the courts decide whether federal law provides a safe harbor for prediction markets to operate nationwide.
Key Takeaway
The bottom line is that Coinbase is fighting to ensure that prediction markets are treated like Wall Street, not Las Vegas. By suing these states, they are trying to stop a “land grab” by gaming regulators who see a $28 billion industry and want to tax and control it like a casino. If Coinbase wins, it clears the path for their big January launch and ensures that your ability to trade on “events” won’t depend on which state you live in.
Is Coinbase a Good Stock to Buy?
According to TipRanks data, the consensus is a Moderate Buy. This is based on 25 analyst ratings, which include 17 Buys, seven Holds, and one Sell over the past three months.
Analysts assign an average 12-month COIN price target of $391.30, representing a 56.3% upside from the latest price.
