Coinbase Litigation Chief Accuses US States of ‘Gaslighting’ Public on Prediction Markets

Prediction markets use “event contracts” that allow users to trade on outcomes including sports and elections. The Commodity Futures Trading Commission argues that contracts traded on a CFTC-registered designated contract market fall under the exclusive federal jurisdiction of the Commodity Exchange Act. New York considers them gambling. The dispute will determine whether states may also use gaming laws to restrict nationwide platforms, with at least eight markets and more than 3,000 contracts at stake.

On April 21, 2026, the New York Attorney General’s Office sued Coinbase and Gemini, alleging that they operated without state licenses and allowed users aged 18 to 20 to participate, below the state’s minimum age of 21. No fixed damages were disclosed; the state also seeks disgorgement of illegal profits and treble penalties. On April 24, the CFTC sued in the U.S. District Court for the Southern District of New York, seeking a declaration of federal preemption and an order barring state enforcement. Together with its April 2 lawsuit against Arizona and two other states, the action expands the dispute to four states.

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 based on event outcomes. Operators argue that they should be regulated by the U.S. Commodity Futures Trading Commission under federal derivatives law, while New York considers contracts tied to sports, entertainment and elections to be gambling. Gemini launched its service nationwide in December 2025, followed by Coinbase in January 2026. Their failure to obtain licenses from the New York State Gaming Commission has put them at the center of a state-federal jurisdictional dispute.

On April 21, 2026, New York Attorney General Letitia James sued Coinbase Financial Markets and Gemini Titan in state court, alleging that the platforms allowed users as young as 18, below the state's minimum age of 21 for mobile sports betting. The state is seeking to halt their operations, recover profits, obtain $100,000 for each violation and impose penalties equal to three times their unlawful gains. Coinbase moved the case to federal court on April 22.