Coinbase has filed lawsuits against Connecticut, Michigan, and Illinois, arguing that state regulators cannot control prediction markets that fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC). The lawsuits aim to prevent state interventions that Coinbase claims threaten its upcoming launch of CFTC-regulated event contracts in January 2026 through a partnership with Kalshi. Coinbase's Chief Legal Officer, Paul Grewal, criticized state efforts to regulate these markets, asserting they violate federal law and stifle innovation. Illinois has already taken action against platforms like Kalshi, claiming they operate without proper licensing under state laws related to sports wagering. The Illinois Gaming Board sent cease-and-desist letters to multiple entities, including Crypto.com and Robinhood. Coinbase argues that the CFTC’s jurisdiction over prediction markets is clear, as Congress specifically excluded only certain commodities from federal oversight. If forced to comply with Illinois regulations, Coinbase would face limitations that contradict federal requirements for accessible trading. The prediction market industry has seen significant growth, with billions in trading volume in 2025. Kalshi's valuation surged to $11 billion after a $1 billion funding round. Experts believe that 2026 could be a pivotal year for prediction markets, as major players like Coinbase and Robinhood integrate these features, potentially transforming the market landscape from a duopoly to a more competitive environment.