Coinbase on Thursday moved to prepare the legal ground ahead of its planned rollout of prediction markets in partnership with Kalshi. The crypto exchange filed lawsuits in Connecticut, Illinois and Michigan seeking declaratory judgments that event contracts fall under the exclusive jurisdiction of the federal Commodities Futures Trading Commission (CFTC). The suits also ask for injunctive relief against state gaming authorities that have sought to prevent prediction markets from operating within their states.
Coinbase is a CFTC-registered futures commission merchant. Kalshi is a registered designated contract market. Coinbase plans to serve as an intermediary, providing its customers access to Kalshi’s exchange through its platform, starting in January.
The platform will allow customers to trade event contracts on sports, politics, climate, and other future events. Kalshi won a similar preliminary injunction in New Jersey and April, but failed in its bid for relief in Nevada. Both states also claimed Kalshi was operating a sports betting operation without the proper license.
Coinbase rejected the comparison with sports betting in the lawsuits filed Thursday. “Prediction markets are fundamentally different from sportsbooks,” Grewal wrote in his thread on X. “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.”
The CFTC has issued no-action letters to Polymarket, Gemini, PredictIt and LedgerX, allowing them to operate in all 50 states provided they comply with various regulations regarding record keeping and transaction clearing. The disputes highlight how prediction markets are becoming as the latest flashpoint between state and federal authorities over the regulation of emerging technologies and platforms.
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