New York Sues Coinbase and Gemini Over Allegedly Illegal Prediction-Market Gambling

Prediction markets allow users to trade “event contracts” tied to the outcomes of contests. Operators including Kalshi argue that such derivatives fall under the exclusive oversight of the U.S. Commodity Futures Trading Commission (CFTC), but Wisconsin considers them sports betting subject to state law. The case therefore raises questions about the boundary between federal and state regulatory authority.

The Wisconsin Department of Justice sued Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com in Dane County court on April 23, 2026, seeking to halt sales of sports event contracts. The complaint alleged that sports contracts generate about 90% of Kalshi’s fee revenue, equivalent to roughly $1.3 billion on an annualized basis. On April 28, the CFTC countersued the state, asserting exclusive federal jurisdiction.

Prediction markets allow users to trade contracts tied to the outcomes of political, economic and other events, and are legally classified as derivatives in the United States. After Coinbase launched its service in partnership with CFTC-regulated Kalshi, state governments continued to argue that the contracts constituted gambling. The dispute centers on whether federal commodities law preempts state regulation.

Coinbase Head of Litigation Ryan VanGrack accused multiple states of misleading the public and called claims that the CFTC was incapable of regulating the markets “gaslighting.” Coinbase has sued governments including Illinois and Connecticut, seeking court rulings affirming the CFTC's preemptive jurisdiction. Detroit is also preparing to join Michigan's legal battle.