Coinbase is suing regulators in Michigan, Illinois, and Connecticut over their attempts to classify prediction markets as unlicensed gambling. The exchange argues these markets are financial derivatives under federal oversight, which could pave the way for broader access if they win. The lawsuits come amid a shift towards federal regulation, following the appointment of a pro-innovation CFTC chairman.

Polymarket has sued Massachusetts, claiming that the U.S. Commodity Futures Trading Commission (CFTC) has exclusive authority over prediction markets, not state regulators. This lawsuit highlights growing tensions as states attempt to classify sports-related prediction contracts as gambling, which would require local licensing. Recent rulings in Massachusetts and other states have further complicated the legal landscape for prediction market operators.