Coinbase's top litigator, Ryan VanGrack, is challenging state regulators, accusing them of misrepresenting federal law as they attempt to block prediction markets. VanGrack, Coinbase's VP of legal and global head of litigation, stated that states are trying to rewrite Congress's authority over derivatives.
Coinbase has filed lawsuits in Connecticut, Illinois, Michigan, and Nevada following the launch of prediction markets in partnership with Kalshi. Some states issued cease-and-desist letters or warnings, classifying sports event contracts as illegal gambling. VanGrack asserted these actions created "real and imminent" threats to customers, necessitating federal court intervention.
VanGrack contends states are mischaracterizing the issue. He called Illinois officials' argument that markets would be unregulated without state intervention "gaslighting," noting the Commodity Futures Trading Commission (CFTC) already oversees vast derivatives markets and actively polices event contracts for insider trading.
The core dispute centers on the regulation of sports-related event contracts. VanGrack argued the Commodity Exchange Act grants the CFTC exclusive jurisdiction over swaps and derivatives, including event contracts. He stated states are attempting to exclude sports contracts from federal definitions of swaps, a reading unsupported by law or precedent.
Coinbase differentiates exchange-traded contracts from sportsbook wagers. On exchanges like Kalshi, prices are set by buyers and sellers under CFTC oversight. Sportsbooks, conversely, are state-regulated entities where operators set odds. VanGrack clarified that Coinbase is not asserting CFTC regulation of sportsbooks, but rather that exchange-traded event contracts fall under federal derivatives law.
This dispute reflects broader conflicts in the crypto industry over fragmented oversight. VanGrack noted that while states retain authority over consumer protection and fraud, subjecting national derivatives markets to "a patchwork of 50 regulators" would harm investor confidence and market stability. He emphasized that Congress established a unified federal framework for derivatives, and prediction markets should be treated consistently.