Coinbase Champions Federal Oversight for Prediction Markets Under CFTC Authority

The Case for Existing Regulatory Framework

Coinbase Global Inc., one of the world’s leading cryptocurrency exchanges, has taken a definitive stance on how prediction markets should be regulated in the United States. In a formal comment letter submitted to the U.S. Commodity Futures Trading Commission (CFTC) on April 30, 2026, and publicly explained by Chief Policy Officer Faryar Shirzad on May 3, the company made a compelling argument that prediction markets don’t need new regulatory categories or authorities. Instead, Coinbase believes these markets fit comfortably within the existing federal derivatives framework that the CFTC already oversees. The company’s position centers on the idea that prediction markets, while they may seem innovative or novel at first glance, are fundamentally similar to other financial instruments the CFTC has successfully regulated for years. These event-based contracts allow people to essentially bet on real-world outcomes, whether political elections, economic indicators, or other measurable events. According to Coinbase, this isn’t really that different from traditional futures contracts or other derivatives that tie financial outcomes to real-world events. The cryptocurrency exchange outlined four key arguments supporting this position, each building on the premise that prediction markets are a natural evolution of instruments already under federal oversight rather than something entirely new requiring special treatment or additional legal authority.

Why Prediction Markets Belong Under Federal Derivatives Law

Coinbase’s reasoning breaks down into four interconnected points that together make the case for CFTC jurisdiction. First, the company argues that the legal foundation already exists. Event-based contracts aren’t new territory for the CFTC, which has spent decades regulating derivatives tied to everything from agricultural commodity prices to weather patterns to economic data releases. Prediction markets simply represent another application of this same principle—creating financial instruments whose value derives from external, verifiable events. Shirzad emphasized this point by noting that while prediction markets “may look novel, they sit comfortably within existing statutory authority—no new mandate required.” This isn’t about expanding the CFTC’s reach into uncharted territory; it’s about recognizing that prediction markets fall within boundaries already established by Congress decades ago when it assigned derivatives oversight to the federal agency.

The second pillar of Coinbase’s argument focuses on the functional similarities between prediction markets and traditional derivatives. At their core, both serve similar economic purposes. They aggregate scattered information from many different participants into a single price signal, essentially crowdsourcing predictions about future events. When thousands of people put their money behind their beliefs about whether something will happen, the resulting price reflects collective wisdom and can be remarkably accurate. This is the same information-aggregation function that futures markets have served for generations in commodities trading. Additionally, both types of instruments allow participants to hedge against uncertainty. Someone worried about a particular outcome can use prediction markets to protect themselves financially, just as farmers use futures contracts to lock in prices and protect against harvest uncertainty. These functional parallels suggest that prediction markets aren’t some strange new creature requiring entirely different regulatory thinking—they’re simply a contemporary application of established financial principles.

The Risk of Fragmented State-Level Regulation

Coinbase’s third major point addresses what might be the most practical concern: the chaos that could result from allowing fifty different states to each regulate prediction markets according to their own rules and preferences. The company argues that Congress deliberately assigned derivatives oversight to a single federal agency specifically to prevent this kind of fragmentation. Prediction markets, by their nature, operate across state lines. Participants from anywhere in the country (or world) can contribute to the same market, with information and capital flowing freely across borders. If each state claims the authority to impose its own rules, restrictions, and enforcement actions, the result would be a patchwork of contradictory regulations that would make it nearly impossible for legitimate prediction market platforms to operate effectively. Some states might ban certain types of contracts while others permit them. Some might impose registration requirements that conflict with neighboring states’ rules. The compliance burden alone could be crushing, especially for newer or smaller platforms. More fundamentally, this fragmentation would undermine the very purpose of having a national derivatives market framework in the first place. Coinbase’s position is that Congress already solved this problem decades ago by creating federal oversight, and there’s no good reason to reverse course now just because the specific application—prediction markets—feels new to some observers.

CFTC Authority to Address Concerns Without New Powers

The fourth component of Coinbase’s argument addresses what is likely the biggest concern of critics and skeptical regulators: protecting the public from manipulation, fraud, and harmful market practices. The company points out that the CFTC doesn’t need new authority to address these legitimate concerns because it already possesses robust enforcement powers. Under existing law, the Commission can review any proposed contracts, impose conditions before allowing them to trade, or prohibit them entirely if they conflict with the public interest. This includes contracts that might be susceptible to manipulation, that serve no legitimate economic purpose, or that could cause other harms. The CFTC has used these powers for decades to maintain the integrity of derivatives markets, and those same tools apply equally well to prediction markets. Shirzad emphasized that “the question is not whether they fit within the law—they do—but how to ensure they develop with integrity, clarity, and appropriate guardrails.” This framing suggests Coinbase isn’t arguing for a hands-off approach or minimal oversight. Rather, the company is saying that regulators already have what they need to do the job properly; they just need to apply existing authority thoughtfully as prediction markets continue to mature and grow. The challenge isn’t about obtaining new legal powers but about implementing existing ones in ways that foster innovation while protecting market participants and the broader public interest.

The Escalating Battle Between Federal and State Authorities

Coinbase’s public position comes at a particularly contentious moment in the ongoing struggle over who gets to regulate prediction markets. Under Chairman Michael Selig, the CFTC has become increasingly assertive in claiming exclusive jurisdiction, arguing that these markets clearly qualify as “swaps” under the Commodity Exchange Act and therefore fall under federal authority. The agency has warned repeatedly that allowing states to enforce their own rules would fracture the national derivatives framework that has served the country well for decades. But many states aren’t backing down. Texas, Arizona, Nevada, New Jersey, and others have pushed back hard, arguing that prediction markets look a lot more like gambling than like traditional financial derivatives, and that states have always had the authority to regulate gambling within their borders. This isn’t just a theoretical debate—it has erupted into active litigation on multiple fronts. The CFTC has filed lawsuits against several states, including Arizona, Connecticut, Illinois, New York, and Wisconsin, trying to block their enforcement actions against prediction market platforms. Meanwhile, states have launched their own legal actions against companies operating in this space. New York has sued both Coinbase Financial Markets and Gemini. Arizona has brought criminal charges against Kalshi, one of the most prominent prediction market platforms. Wisconsin, Connecticut, and Illinois have issued cease-and-desist orders against platforms like Kalshi and Polymarket, demanding they stop operating in those states or face penalties. Court rulings so far have been all over the map, with some judges siding with federal preemption arguments and others backing state authority, creating an unsettled legal landscape that leaves everyone uncertain about what rules actually apply.

Looking Ahead: The Need for Clarity and Uniform Standards

This messy jurisdictional fight provides crucial context for understanding why Coinbase felt compelled to stake out its position so clearly. The company isn’t just making an abstract legal argument—it’s responding to a real crisis in regulatory clarity that threatens to stifle a promising market technology. The current situation, where platforms face conflicting demands from federal and state authorities and where court rulings contradict each other, serves nobody’s interests well. Legitimate businesses can’t plan effectively when the rules keep changing depending on which courthouse or regulator they’re dealing with. Consumers and market participants lack the protection that comes from clear, consistent oversight. And regulators themselves waste resources fighting each other instead of focusing on actual market supervision. Coinbase’s position is that prediction markets should be allowed to develop and mature under existing federal oversight, with the CFTC applying the regulatory tools it already possesses to ensure these markets operate with integrity. The company has emphasized its commitment to continued engagement with the Commission as the regulatory approach evolves, recognizing that even within a federal framework, there’s room for refinement and adjustment as regulators and industry participants learn more about how these markets function in practice. The ultimate goal, from Coinbase’s perspective, should be enabling prediction markets to realize their potential benefits—improved information aggregation, better forecasting, new hedging opportunities—while maintaining appropriate guardrails against manipulation, fraud, and other harms. Whether this vision will prevail depends largely on how courts ultimately resolve the jurisdictional questions and whether Congress might eventually step in to clarify the legal framework. For now, Coinbase has made its position clear: prediction markets belong under federal derivatives law, they don’t require new regulatory authority, and uniform national oversight is far preferable to a fragmented state-by-state approach.