Key Takeaways
- Coinbase is suing the states of Michigan, Illinois, and Connecticut over their attempts to crack down on prediction markets.
- State gambling regulators have issued a string of cease-and-desist orders against Kalshi.
- Both Coinbase and Kalshi are seeking a definitive federal ruling to settle the matter.
Coinbase has joined Kalshi in pushing back against U.S. state gambling regulators, escalating a growing legal clash over the future of prediction markets.
At issue is the question of whether event contracts should be federally regulated as financial instruments or treated as gambling products under state law.
States Crack Down on Prediction Markets
Throughout 2025, state gambling authorities have moved to shut down or restrict Kalshi and other prediction market platforms.
The latest state to issue cease-and-desist orders is Connecticut, which has joined Illinois, Maryland, New Jersey, Arizona, Nevada, Massachusetts, and New York among those that have launched or threatened legal action.
Several Native American tribes have also filed lawsuits, arguing that prediction market operators infringe on their exclusive rights to offer certain gambling products in the U.S.
On one side of the argument, state regulators and tribal groups argue that event contracts are effectively bets, no different from those offered by traditional sportsbooks.
Meanwhile, platforms such as Kalshi counter that their products function as financial instruments designed for price discovery, and therefore fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
Coinbase Enters the Fray
As Coinbase prepares to list Kalshi’s event contracts on its trading platform, the crypto exchange operator said it is suing the states of Michigan, Illinois, and Connecticut, Bloomberg reported on Friday, Dec. 19.
“These states have taken or threatened action against other prediction market players in an attempt to gain jurisdiction over something they have no legal right to regulate,” the company said.
They are therefore “likely to do the same against Coinbase as we enter the prediction market space,” the company concluded, per Bloomberg.
Coinbase’s complaints build on Kalshi’s own legal counteroffensive, which includes a string of lawsuits seeking to block states’ cease-and-desist orders and prevent gambling regulators from cracking down on prediction markets.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
