Why it matters: Ryan VanGrack, Coinbase’s VP of legal and global head of litigation, is sharpening Coinbase’s challenge to state regulators, saying they are trying to rewrite Congress’ authority over derivatives.
Coinbase has filed lawsuits in Connecticut, Illinois, Michigan and Nevada after launching prediction markets in partnership with Kalshi.Some of those states issued cease-and-desist letters or public warnings, arguing sports event contracts amount to illegal gambling.VanGrack said those actions left customers facing “real and imminent” threats that forced Coinbase to seek clarity in federal court.
The argument: VanGrack says states are framing the issue incorrectly.
Illinois officials argued in court that without state intervention, the markets would go unregulated due to limited CFTC resources.VanGrack called that claim “gaslighting,” saying the Commodity Futures Trading Commission has long overseen multi-trillion-dollar derivatives markets.He pointed to recent CFTC enforcement reminders around insider trading in event contracts as evidence the agency is actively policing the space.
Federal vs. state power: At the center is who gets to regulate sports-related event contracts.
VanGrack argued the Commodity Exchange Act grants the CFTC exclusive jurisdiction over swaps and derivatives, including event contracts.The law contains a “special rule” allowing the CFTC — not states — to prohibit gaming event contracts on public policy grounds.States are attempting to carve sports contracts out of the federal definition of swaps, a reading VanGrack said is unsupported by the statute’s text or precedent.
Sports betting distinction: Coinbase says exchange-traded contracts differ fundamentally from sportsbook wagers.
On a designated contract market like Kalshi, buyers and sellers set prices on an exchange overseen by the CFTC.In traditional sportsbooks, operators set odds and take the other side of the bet, a structure regulated by states.No one is arguing the CFTC regulates sportsbooks, VanGrack said — only that exchange-traded event contracts fall under federal derivatives law.
Bigger stakes: The dispute mirrors broader crypto fights over fragmented oversight.
VanGrack said states retain authority over consumer protection and fraud.But subjecting national derivatives markets to “a patchwork of 50 regulators” would undermine investor confidence and market stability.Congress long ago chose a unified federal framework for derivatives, he said, and prediction markets should be treated no differently.