Coinbase has formally urged the Commodity Futures Trading Commission (CFTC) to maintain current federal oversight of prediction markets, arguing that state-level regulation would create regulatory chaos. In a detailed comment letter filed on April 30 in response to the CFTC’s Advance Notice of Proposed Rulemaking, the exchange asserted that event-based contracts are derivatives that already fall under existing federal law and require no new regulatory mandate.
Key Arguments from Coinbase's Filing
Chief Policy Officer Faryar Shirzad outlined the company's position in four key points. He argued that prediction markets are not a novel financial product but are closely aligned with traditional futures markets, as both systems aggregate dispersed information into prices and support risk management. Coinbase emphasized that the CFTC already holds the authority to review and prohibit specific contracts that are deemed contrary to the public interest, such as those related to terrorism, assassination, or gaming. The company insisted this power should be used to address specific problematic contracts, not to ban an entire asset class that it described as a 'public good.'
Conflict Between Federal and State Authorities
The letter arrives amid escalating legal tensions between federal and state regulators. The CFTC has filed lawsuits against Wisconsin and New York over their enforcement actions against platforms like Coinbase, Kalshi, Robinhood, Polymarket, and Crypto.com. At the same time, state authorities in Wisconsin have pursued felony charges under state gambling laws against these federally regulated platforms. In a separate action, New York’s attorney general sued Coinbase over its prediction market offerings on April 22. Coinbase has also launched its own legal challenges, suing Illinois, Michigan, and Connecticut in December 2025 after those states attempted to shut down its markets under gambling laws.
Call for Clear and Consistent Regulation
Coinbase warned that fragmented state-by-state intervention would recreate the 'total chaos' that Congress sought to prevent when it created the federal derivatives framework in 1974. The company argued that derivatives markets are inherently interstate and require consistent federal supervision. To address these issues, Coinbase called for the CFTC to replace its current Rule 40.11 with a new rule that explicitly requires a two-step process: first determining whether a contract falls into a prohibited category, and then separately determining whether it is against the public interest. The exchange also recommended modernizing guidance on how exchanges can demonstrate that a contract is not susceptible to manipulation.
Broader Context and Industry Impact
The filing adds to Coinbase’s broader policy engagement as lawmakers review the CLARITY Act, with Senators Thom Tillis and Angela Alsobrooks negotiating related provisions. Supporting its position, Coinbase cited a Federal Reserve staff working paper published earlier this year that found prediction markets matched or beat the forecasting accuracy of established benchmarks, including the New York Fed’s own surveys.
