Nevada Regulators Sue Coinbase Over Prediction Markets

The Nevada Gaming Control Board filed its complaint in the District Court for Carson City on Monday, seeking both a permanent injunction and declaratory relief against Coinbase. Central to the state’s argument is the claim that offering “sports event contracts, or certain other event contracts” constitutes wagering activity under Nevada statutes NRS 463.0193 and 463.01962. Consequently, the Board asserts that any entity offering such contracts must hold a state gaming license. The filings specifically target Coinbase’s recently launched prediction markets product, offered through a partnership with CFTC-registered designated contract market Kalshi, which allows U.S. customers to trade contracts on events ranging from college basketball and professional football games to elections.

Beyond the licensing issue, Nevada’s complaint highlights a critical regulatory mismatch: Coinbase’s platform permits users aged 18 and above to open accounts and trade, directly contravening Nevada’s established minimum gambling age of 21. The Board stated it is suffering “serious, ongoing, irreparable harm every day that Coinbase operates its market in violation of Nevada law.” Furthermore, regulators argue that Coinbase’s operations grant it a “massive and unfair competitive advantage” over licensed Nevada sportsbooks, which are burdened with substantial licensing fees, taxes, physical location requirements, and stringent consumer protection mandates that the digital platform allegedly bypasses.

The Nevada action is not an isolated incident but part of a widening regulatory crackdown. It follows similar enforcement steps against other prediction-market platforms, including a cease-and-desist order against Kalshi in March of last year and a more recent temporary restraining order issued by a Nevada state court against Polymarket, blocking its event contracts for two weeks. The dispute with Kalshi has evolved into a protracted legal fight, featuring a brief injunction in Kalshi’s favor that was lifted in November 2023—a decision the company is now appealing in the Ninth Circuit Court of Appeals.

Coinbase’s stance, however, directly challenges the premise of state-level enforcement. Just weeks before the Nevada filing, Coinbase initiated federal lawsuits against gaming regulators in Connecticut, Michigan, and Illinois. In those suits, the company argues that the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over prediction markets, classifying them as financial instruments rather than gambling products. Coinbase contends that state enforcement efforts “stifle innovation and violate the law,” setting up a fundamental clash between federal financial regulation and state gambling control. The legal landscape is becoming increasingly crowded, as noted by sports wagering attorney Daniel Wallach of Wallach Legal LLC, who highlighted that multiple amicus groups, including dozens of states and tribal organizations, have filed briefs backing Nevada’s position in the Kalshi case.

The outcome of Nevada’s case against Coinbase could have profound implications for the entire prediction market industry. At its heart is the unresolved question of whether event-based contracts are a form of regulated gambling or a novel financial derivative under the CFTC’s purview. Nevada Gaming Control Board Chairman Mike Dreitzer framed the state’s action as reinforcing its “obligation to operate a thriving gaming industry and to protect Nevada citizens.” This perspective underscores the state’s vested interest in maintaining the integrity and economic model of its licensed gaming ecosystem, which would be disrupted by unlicensed digital competitors.

For companies like Coinbase, Kalshi, and Polymarket, the legal assaults from multiple states represent a significant threat to their business models. If state regulators prevail, these platforms could be forced to either secure costly and complex state gambling licenses across numerous jurisdictions or cease offering event contracts to residents of those states entirely. Conversely, a victory for Coinbase in establishing federal preemption would dramatically curtail state authority and potentially open the door for a nationwide expansion of prediction markets. The escalating conflict suggests that a definitive resolution, likely from a higher federal court, will be necessary to determine whether prediction markets can coexist with—or must be subsumed by—the established framework of state-regulated gambling.