Why is it important: Ryan VanGrack, Coinbase’s VP of Legal and Global Litigation, sharpens Coinbase’s challenge to state regulators, saying they are trying to rewrite Congress’s authority over derivatives.
- Coinbase has filed lawsuits in Connecticut, Illinois, Michigan and Nevada after launching prediction markets in partnership with Kalshi.
- Some of these states issued cease-and-desist letters or public warnings, claiming that sporting event contracts constitute 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 problem incorrectly.
- Illinois officials argued in court that without state intervention, the markets would become unregulated because of limited CFTC resources.
- VanGrack called that claim “gaslighting,” and said the Commodity Futures Trading Commission has long overseen multitrillion-dollar derivatives markets.
- He pointed to recent CFTC enforcement reminders about insider trading in event contracts as evidence that the agency is actively policing the area.
Federal vs. state power: At the center is who is allowed to regulate sports-related event contracts.
- VanGrack argued that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps and derivatives, including event contracts.
- The law includes a “special rule” that allows the CFTC — not states — to ban gaming event contracts on grounds of public policy.
- States are trying to carve out sports contracts from the federal definition of swaps, a reading that VanGrack said is not supported by the statute’s text or precedent.
Sports Betting Award: Coinbase says exchange-traded contracts are fundamentally different from sportsbook bets.
- In 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 that the CFTC regulates sportsbooks, VanGrack said — only that exchange-traded event contracts fall under federal derivatives law.
Larger stakes: The dispute reflects broader crypto struggles 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.
