Coinbase says states are ’gaslighting’ over prediction markets, argues CFTC has exclusive jurisdiction
Coinbase’s head of litigation, Ryan VanGrack, has escalated legal challenges against multiple U.S. states after Coinbase launched exchange-traded prediction markets with Kalshi. Coinbase filed lawsuits in Connecticut, Illinois, Michigan and Nevada following state cease-and-desist letters and public warnings that characterized certain event contracts as illegal sports gambling. VanGrack says states are misrepresenting federal law—“gaslighting”—and argues the Commodity Futures Trading Commission (CFTC) has exclusive authority under the Commodity Exchange Act to regulate event contracts and swaps. He pointed to CFTC enforcement actions (including insider-trading reminders around event contracts) as evidence the agency actively polices the space. Coinbase distinguishes exchange-traded event contracts on a designated contract market from sportsbook wagers, noting CFTC-regulated markets match buyers and sellers on an exchange rather than operators setting odds. VanGrack warned that subjecting national derivatives markets to 50 different state regimes would fragment oversight, harm market stability and undermine investor confidence. Coinbase acknowledges states retain consumer-protection and fraud authority but says federal preemption should prevent states from banning or reclassifying exchange-traded event contracts. Key entities: Coinbase, Kalshi, CFTC; key issue: federal vs. state regulatory authority over prediction markets and event contracts.
Neutral
This dispute is primarily regulatory and legal rather than an immediate market-moving event for crypto prices. Coinbase pursuing federal court clarity could reduce regulatory uncertainty for exchange-traded event contracts if it succeeds, which would be bullish for products tied to regulated derivatives markets in the medium term. However, prolonged litigation and the risk of adverse rulings or state-level enforcement actions create near-term uncertainty and possible operational restrictions that could limit product availability and liquidity—factors that are neutral-to-moderately negative for short-term trading. Similar past events: SEC enforcement actions and court fights (e.g., SEC vs. Ripple, state actions against crypto firms) created periods of volatility but did not uniformly determine long-term asset prices; clearer federal rulings later supported market stability. For traders: expect possible short-term volatility around legal filings, injunctions or court decisions and potential shifts in liquidity for prediction-market tokens or derivative-linked products. If Coinbase wins or CFTC affirms jurisdiction, expect improved institutional confidence and gradual positive impacts on derivatives products; a loss or fragmented state enforcement could constrict offerings and raise compliance costs, weighing on sentiment.