Coinbase’s vice president of legal and global head of litigation, Ryan VanGrack, has intensified the company’s legal battle with several US states over the regulation of prediction markets. He argues that state regulators are mischaracterizing federal law as they attempt to block exchange traded event contracts launched in partnership with Kalshi.
The dispute centers on prediction markets tied to sports outcomes and other events. After Coinbase expanded access to these contracts, regulators in Connecticut, Illinois, Michigan and Nevada issued cease and desist letters or public warnings. State officials claim that certain sports related event contracts resemble illegal gambling products under their jurisdiction.
Coinbase has responded by filing lawsuits in federal court, seeking clarity on whether such contracts fall under exclusive federal oversight. According to VanGrack, customers faced real and imminent regulatory threats as states moved to restrict access, prompting the company to challenge the actions.
At the heart of the legal debate is the scope of authority granted under the Commodity Exchange Act. VanGrack maintains that the law gives the Commodity Futures Trading Commission exclusive jurisdiction over swaps and derivatives, including event based contracts traded on regulated exchanges. He argues that the statute includes a specific provision allowing the CFTC to prohibit certain gaming related event contracts on public policy grounds, but does not authorize states to override federal authority in this area.
Illinois officials have argued in court filings that without state intervention, prediction markets could operate with limited oversight due to the CFTC’s resource constraints. VanGrack rejects that view, stating that the federal regulator has long supervised multi trillion dollar derivatives markets. He also points to recent CFTC enforcement reminders regarding insider trading in event contracts as evidence of active federal oversight.
Coinbase differentiates exchange traded event contracts from traditional sports betting. On platforms such as Kalshi, which operate as designated contract markets, buyers and sellers transact on an open exchange with pricing determined by market participants. In contrast, sportsbooks typically set odds and take the opposite side of customer wagers, a model regulated at the state level.
The company does not dispute state authority over sportsbooks. Instead, it contends that exchange traded event contracts fall squarely within the federal derivatives framework. VanGrack warns that allowing individual states to reinterpret federal derivatives law could fragment oversight and create regulatory uncertainty for national markets.
The broader implications extend beyond prediction markets. The case reflects ongoing tensions between federal and state regulators over emerging financial products, including digital assets. While VanGrack acknowledges that states retain authority over consumer protection and fraud enforcement, he argues that subjecting federally regulated derivatives markets to multiple state regimes would undermine consistency and investor confidence.
As litigation proceeds, the outcome could clarify how prediction markets are classified under US law and determine whether federal or state regulators hold primary authority over these evolving financial instruments.
