Coinbase Legal Head Criticizes State Regulators for Misleading Public on Prediction Market Regulation

Odaily News Coinbase's Vice President of Legal and Global Head of Litigation, Ryan VanGrack, stated that some state governments in the U.S. are "misleading the public" when restricting prediction market businesses, misinterpreting federal law in an attempt to expand state-level regulatory authority.

Following Coinbase's recent collaboration with prediction market platform Kalshi to launch related products, the company has filed lawsuits in Connecticut, Illinois, Michigan, and Nevada. Regulatory agencies in these states had previously issued cease-and-desist orders or warnings, claiming that contracts related to sporting events constitute illegal gambling. VanGrack stated that these actions pose a "real and immediate threat" to users, prompting Coinbase to seek a federal court ruling.

VanGrack pointed out that the U.S. Commodity Exchange Act clearly grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over derivatives markets, including prediction market products such as event contracts, which should fall under federal regulatory purview. He argued that states' attempts to exclude sports event contracts from the definition of derivatives lack legal basis.

In response to claims by some state governments that the market would lack regulation without state intervention, VanGrack refuted this, emphasizing that the CFTC has long overseen a multi-trillion dollar derivatives market and has issued enforcement reminders regarding insider trading in event contracts.

Coinbase also noted that exchange-based prediction markets are fundamentally different from traditional sports betting. On CFTC-regulated exchanges like Kalshi, prices are determined by market participants, whereas traditional betting operators set odds and directly act as the counterparty.

VanGrack stated that states can still play a role in consumer protection and anti-fraud efforts, but subjecting a national derivatives market to a "patchwork of 50 different regulators" would harm market stability and investor confidence.