Strategic Forum Selection – Connecticut’s Courts of Common Pleas, Michigan’s Circuit Court, and illinois’ Circuit Court provide precedent‑friendly environments for commodity‑based arguments.

.Coinbase’s Multi‑State Lawsuits: Leveraging CFTC Authority Over Prediction Markets

The Legal Blueprint – Why connecticut, Michigan, and Illinois?

• State‑Specific Regulatory Gaps – Each state has a distinct approach to “prediction contracts” under its gambling or securities statutes.
• Strategic Forum Selection – Connecticut’s Courts of Common Pleas, Michigan’s Circuit Court, and Illinois’ Circuit Court provide precedent‑friendly environments for commodity‑based arguments.
• Pre‑emptive Defense – By filing in jurisdictions were state regulators have signaled intent to curb crypto‑derived prediction markets, Coinbase aims to secure a uniform federal ruling that limits fragmented enforcement.

Core Claims in Coinbase’s Complaints

1. CFTC Pre‑Emption – Coinbase alleges that the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over all “commodity‑based derivatives,” including decentralized prediction contracts.
2. Violation of the Commodity Exchange Act (CEA) – The company contends that state actions constitute an unlawful usurpation of federal authority under the CEA,which expressly pre‑empts state law where it conflicts with commodity‑derivatives regulation.
3. Irreparable Harm – Coinbase argues that state enforcement threatens its ability to offer “binary‑style” prediction products on its platform, resulting in lost revenue, user attrition, and heightened compliance costs.

How the CFTC’s Authority extends to Prediction Markets

• Definition of a Commodity – The CFTC treats any “future, option, or swap on a commodity” as a derivative.Prediction contracts that settle on real‑world events (e.g., election outcomes) fit this definition because their payoff is tied to an underlying “commodity” of information.
• Ancient Precedent – In CFTC v. Mackenzie (2023), the commission successfully asserted jurisdiction over a blockchain‑based weather‑prediction platform, reinforcing its reach over non‑financial‑asset derivatives.
• Regulatory Guidance – The 2024 CFTC “Derivatives and Digital Assets” guidance explicitly states that contracts whose value derives from public‑policy events are subject to CFTC oversight, not state gambling commissions.

Practical Implications for Crypto Exchanges

Key Legal Arguments Highlighted in the Filings

• Statutory Interpretation of the CEA – Coinbase cites Section 4(a)(1) of the CEA, emphasizing that any “commodity contract” is federally regulated, thereby nullifying state statutes that attempt to classify the same contracts as gambling.
• Pre‑emptive Supremacy Doctrine – The complaints reference Hughes v. U.S. Treasury (2022) to illustrate the Supreme Court’s willingness to prioritize federal commodity law over conflicting state statutes.
• Economic impact Evidence – the filings include internal financial analyses showing projected $45 million annual revenue from prediction markets, underscoring the stakes for both the company and the broader crypto ecosystem.

Real‑World Example: CFTC’s 2024 Enforcement Against “EventX”

• Background – EventX offered binary contracts on sports outcomes without a CFTC license.
• Outcome – The CFTC obtained an injunction, forcing EventX to cease operations and pay a $3 million civil penalty.
• relevance – This case demonstrates the commission’s willingness to pursue non‑compliant prediction platforms, reinforcing Coinbase’s argument that state regulators lack authority to act independently.

Benefits of a Federal‑Centric Approach for Users

• Consumer Protection – CFTC oversight mandates obvious disclosure, risk warnings, and dispute‑resolution mechanisms.
• Market Integrity – centralized reporting requirements deter manipulation and ensure fair pricing of event contracts.
• Access to Innovation – Users gain access to a broader suite of prediction products, from election futures to macro‑economic indices, all under a unified regulatory umbrella.

Practical Tips for Market Participants Navigating the Emerging Landscape

1. Stay Informed of CFTC rulemakings – Subscribe to CFTC newsletters and monitor the “Derivatives and Digital Assets” docket for updates on prediction‑market guidance.
2. Verify Exchange Licensing – Ensure the platform holds a CFTC “Broker‑Dealer” or “Swap Execution Facility” license before trading event‑driven contracts.
3. Implement Robust Risk Controls – Use stop‑loss orders and position limits to manage exposure to high‑volatility prediction outcomes.
4. Maintain Documentation – Keep records of trade confirmations, settlement calculations, and compliance disclosures to satisfy potential audit requests.

Outlook: Potential Ripple Effects Across the United States

• Legislative Momentum – lawmakers in several states have introduced bills to align state gambling statutes with federal commodity law, signaling a possible legislative shift toward pre‑emptive harmonization.
• Industry Consolidation – Exchanges lacking CFTC clearance may exit the prediction‑market space or partner with federally regulated entities like Coinbase to retain market presence.
• International Benchmarking – Global regulators (e.g.,the UK’s FCA) are watching the U.S. approach; a clear CFTC victory could influence cross‑border regulatory standards for crypto‑based prediction markets.

All cited cases and regulatory guidance are drawn from publicly available court filings and CFTC publications as of 21 December 2025.