Coinbase's head of global litigation, Ryan VanGrack, has launched a sharp legal and rhetorical offensive against state regulators, accusing them of attempting to rewrite federal law and engaging in "gaslighting" regarding the oversight of prediction markets. The conflict stems from Coinbase's August 2025 partnership with prediction market platform Kalshi to offer exchange-traded event contracts, which triggered cease-and-desist letters and public warnings from state authorities in Connecticut, Illinois, Michigan, and Nevada.
VanGrack argues these state actions pose "real and imminent" threats to customers, forcing Coinbase to seek clarity in federal court. At the heart of the dispute is whether sports-related event contracts constitute illegal gambling under state law or are federally regulated derivatives. VanGrack contends the Commodity Exchange Act grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over swaps and derivatives, including these contracts, and contains a "special rule" allowing only the CFTC—not states—to prohibit them on public policy grounds.
The litigation head specifically criticized Illinois officials' claim that state intervention is necessary due to limited CFTC resources, labeling that argument a form of "gaslighting." He pointed to the CFTC's long-standing oversight of multi-trillion-dollar derivatives markets and recent enforcement reminders around insider trading in event contracts as evidence of the agency's active regulatory capacity.
Coinbase draws a fundamental distinction between its prediction markets and traditional sports betting. On a CFTC-overseen designated contract market like Kalshi, buyers and sellers set prices on an exchange for contracts that settle based on verifiable outcomes. In contrast, sportsbook operators set odds and take the other side of the bet, a structure regulated by states. VanGrack emphasized that no one is arguing the CFTC should regulate sportsbooks, only that exchange-traded event contracts fall under federal derivatives law.
The broader stakes involve preventing a fragmented regulatory landscape. VanGrack warned that subjecting national derivatives markets to "a patchwork of 50 regulators" would undermine investor confidence and market stability, arguing that Congress long ago established a unified federal framework for derivatives that should apply equally to prediction markets.
