Coinbase Secures Victory as Nevada Court Rejects Request to Block Prediction Markets
Nevada's attempt to immediately shut down Coinbase's event contract markets was rejected by a state judge, while the crypto exchange advances its federal preemption defense against CFTC oversight.
A judge in Nevada's state court system has rejected a request from state regulators seeking an emergency temporary restraining order (TRO) that would have immediately shut down Coinbase's newly launched prediction market platform.
Rather than granting the immediate relief sought, the court scheduled a hearing for the following week to allow the cryptocurrency exchange an opportunity to formally respond, as confirmed by Coinbase's chief legal officer Paul Grewal.
Earlier this week on Monday, the Nevada Gaming Control Board (NGCB) initiated a civil enforcement proceeding in Carson City, claiming that Coinbase was operating unlicensed gambling operations by offering wagers on sports-related event contracts and requesting both a TRO and preliminary injunction to prevent Nevada residents from accessing these products.
Coinbase fights case in state and federal court
Through a filing submitted on Tuesday, Coinbase maintained that the order Nevada regulators were seeking extended well beyond sports betting activities and would in practice prevent the company from offering any event contracts regulated by the Commodity Futures Trading Commission (CFTC) to users in the state, including contracts connected to financial markets or commodity price movements.
Additionally, the company informed the court that regulators failed to demonstrate any legitimate claim of irreparable harm given that Kalshi, the CFTC-registered marketplace whose contracts are listed on Coinbase's platform, retains the ability to offer identical products directly to Nevada residents even as the legal proceedings continue.
According to Grewal, Coinbase has simultaneously initiated proceedings in Nevada's federal court system, attempting to stop the state's enforcement actions on grounds that they violate federal statutes.
"Congress gave CFTC exclusive jurisdiction over these listed contracts," he said, "and it's Congress that calls the shots."
Within its legal brief, Coinbase maintains that the Commodity Exchange Act provides the CFTC with "exclusive jurisdiction" over both swaps and event contracts that are traded on regulated exchanges, and that Nevada's efforts to reclassify these financial instruments as state-regulated gambling activities are preempted by the federal derivatives regulatory framework established by Congress.
This confrontation emerges merely days following a Nevada judge's decision to grant a 14-day TRO that compelled Polymarket to cease offering certain event markets to residents of the state.
Nevada isn't the only US state pushing back against prediction markets. In January, Tennessee's Sports Wagering Council ordered a group of platforms, including Kalshi and Polymarket, to halt sport event contracts for its residents.
In December, Coinbase followed Kalshi's lead and sued regulators in Connecticut, Illinois and Michigan, arguing that prediction markets listed on a CFTC-regulated venue fall under federal jurisdiction.