A Michigan federal judge has denied Coinbase’s request for a preliminary injunction, allowing state regulators to continue enforcing sports betting laws against the crypto exchange’s event contracts. U.S. District Judge Shalina Kumar of the Eastern District of Michigan ruled that Coinbase failed to show a likelihood of success on its claim that federal commodities law preempts Michigan’s jurisdiction over prediction markets, calling the exchange’s arguments “applesauce.”
Coinbase sued Michigan Attorney General Dana Nessel in December 2025, arguing that prediction markets fall under the exclusive oversight of the Commodity Futures Trading Commission (CFTC) via the Commodity Exchange Act (CEA). The company seeks to offer its customers access to event contracts supplied through Kalshi, a designated contract market. Coinbase contended that Michigan’s Lawful Sports Betting Act (LSBA) is “conflict preempted” because it frustrates Congress’s goal of a uniform federal regulatory scheme and makes simultaneous compliance with both the CEA and state gaming laws impossible.
Judge Kumar rejected each pillar of Coinbase’s position. She held that sports event contracts do not clearly qualify as swaps under the CEA, undercutting the core preemption theory. The court also dismissed the impossibility argument, writing that “it is not impossible for Coinbase to comply with the LSBA simply because it is costly and challenging.” The ruling addresses only preliminary relief, leaving the broader lawsuit unresolved but stripping Coinbase of the immediate shield it sought against Michigan enforcement.
The decision intensifies a nationwide legal split over prediction market jurisdiction. In April, the Third Circuit sided with Kalshi in New Jersey, finding a reasonable chance that sports event contracts are swaps and thus federally preempted. Other courts, including district judges in Ohio and Michigan, have rejected or limited the industry’s preemption theory. The CFTC, under Chairman Michael Selig, has taken the opposite institutional stance, suing multiple states and advancing rulemaking to assert exclusive federal authority. A June proposal would create a 90‑day review process for event contracts involving gaming, while another addresses reporting requirements.
Coinbase Chief Legal Officer Paul Grewal previously said that state efforts to control prediction markets “stifle innovation and violate the law”, maintaining that prediction markets differ fundamentally from sportsbooks. The exchange can continue litigating its claims and may appeal the injunction denial. The case raises the prospect of conflicting appellate rulings that could ultimately draw Supreme Court review, while the CFTC’s parallel regulatory push adds further complexity.
The Michigan outcome leaves Coinbase without a preliminary shield and underscores the uncertain legal landscape for federally regulated event contracts. With the exchange expanding into stocks, crypto, and derivatives alongside its prediction market offering, the ability to offer uniform services nationwide hangs in the balance.
