TL;DR:
- Grewal, Coinbase’s chief legal officer, moved New York’s attorney general lawsuit over prediction markets to federal court.
- Attorney General Letitia James alleges that Coinbase and Gemini operated prediction markets without a state gambling license in New York.
- Eleven states have initiated legal actions against prediction market platforms, challenging the CFTC’s exclusive jurisdiction.
Paul Grewal, chief legal officer of Coinbase, announced that the company moved the lawsuit filed by New York Attorney General Letitia James from state to federal court. Grewal argued that the case involves disputed questions of federal law, specifically around how event contracts are regulated under the authority of the Commodity Futures Trading Commission (CFTC).
The original lawsuit, filed Tuesday by James against Coinbase Financial Markets and Gemini Titan, alleges that both companies offered prediction markets in New York without a state gambling license. According to the attorney general, their platforms allowed users to place bets on sports, entertainment, and elections, including users between 18 and 20 years old. The lawsuit seeks fines, the forfeiture of illicit profits, and restitution to affected customers.
Grewal and Coinbase Will Fight for the Federal Framework
Grewal argues that prediction markets are “nationally regulated exchanges at the federal level” under the CFTC, and that Coinbase will continue to fight for the federal oversight framework established by Congress. The company had launched its prediction markets across all 50 states, including New York, on January 28, offering operations on real-world outcomes across sports, politics, culture, and other categories.
The move to federal jurisdiction turns this case into an inflection point for determining whether prediction markets fall under the CFTC’s exclusive jurisdiction or whether states can apply their own gambling laws.
State vs. Federation: the Battle over Prediction Markets
The tension between state and federal regulators continues to escalate with no resolution in sight. Eleven states have initiated legal actions against platforms of this type. On April 2, the CFTC sued gambling regulators in Illinois, Connecticut, and Arizona, arguing that they cannot apply their local regulations to event contracts on platforms under its supervision. Six days later, the CFTC and the Department of Justice asked a federal court to block Arizona from enforcing its state legislation against event contracts offered by Kalshi, reaffirming the federal government’s stance on exclusive regulatory authority.
