Coinbase Sues Multiple States Claiming Prediction Markets Fall Under Federal CFTC Oversight, CEO Warns State Intervention Hurts Innovation

Coinbase CEO Brian Armstrong Pushes For Exclusive CFTC Oversight Amid State Lawsuits

Coinbase CEO Brian Armstrong on 22 December criticised state attempts to regulate prediction markets, asserting that federal oversight should be the standard.

In a post on X, Armstrong said,

“Prediction markets should be regulated by the CFTC. Any state government claiming otherwise is hindering Americans from using tools that help enhance their competitiveness.”

The statement comes as Coinbase challenges regulations in Michigan, Illinois, and Connecticut, filing lawsuits to clarify federal authority.

Why Coinbase Is Taking States To Court

The cryptocurrency exchange has initiated legal action against Michigan, Illinois, and Connecticut, arguing that state interventions conflict with the Commodity Exchange Act (CEA).

Coinbase seeks declaratory and injunctive relief, claiming that prediction markets fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state gaming authorities.

Armstrong and the company maintain that state restrictions could cause “irreparable harm” by blocking access to federally regulated products.

How Federal Law Defines Prediction Markets

In its filings, Coinbase pointed to the CEA, which grants the CFTC broad authority over derivatives and commodities.

The law lists only a few exclusions, such as onions and “motion-picture box-office receipts,” leaving sports and political event contracts under federal oversight.

The company emphasises that these contracts operate differently from traditional sportsbooks, functioning as neutral platforms that match buyers and sellers without taking directional risk.

Legal And Political Tensions Grow

Paul Grewal, Coinbase’s Chief Legal Officer, tweeted,

“We’re right on the law and the facts. And we will prove it.”

This reflects the company’s confidence in its legal position.

The lawsuits coincide with increased scrutiny from state regulators.

Connecticut’s Department of Consumer Protection recently issued cease-and-desist orders to major prediction market platforms.

Illinois and Michigan have also enforced similar actions, with Michigan’s Gaming Control Board warning operators for nearly two years.

Prediction Markets Ready For Expansion

Coinbase’s legal challenge aligns with its partnership with Kalshi, a CFTC-regulated platform, as it prepares to expand event-based contract trading across the US from January 2026.

The company aims to roll out its prediction market feature more broadly following a 17 December announcement.

Industry observers note growing momentum in the sector, with platforms such as Kalshi and Polymarket generating billions in trading volume over the past year.

Robinhood CEO Vlad Tenev has described the sector as entering the early stages of a “prediction market supercycle,” signalling potential long-term growth.

Will States Or The Federal Government Control Prediction Markets

Coinbase argues that federal law already designates regulatory authority to the CFTC, leaving states without power to prohibit or restrict prediction markets under gambling statutes.

The legal dispute reflects a broader tension over innovation and regulation, with Coinbase positioning itself to defend federally regulated products from state-level restrictions.

Armstrong’s comments emphasise the company’s stance that state intervention impedes American access to competitive market tools, framing the debate as a crucial test of federal versus state oversight in a rapidly evolving financial sector.