Coinbase Sues Attorney General and Nevada Gaming Board

• The Nevada Gaming Control Board is suing Coinbase to prevent it from offering sports event contracts in the state
• Coinbase quickly responded with a suit of its own
• Company calls Nevada action a manufactured emergency

Coinbase Global (NASDAQ: COIN) late Wednesday responded to a suit filed by the Nevada Gaming Control Board (NGCB) with litigation of its own, suing the regulator and the attorney general.

The cryptocurrency brokerage giant, which recently entered the prediction markets industry, filed a suit in federal court Wednesday claiming Nevada is improperly leveraging its gaming statutes to prevent the company from offering event contracts there. One of the newest entrants in the yes/no derivatives arena, Coinbase previously filed similar suits against regulators in Connecticut, Illinois, and Michigan after receiving civil enforcement actions from those states.

In its suit filed on Tuesday, Nevada argues the sports derivatives offered by Coinbase fit the state’s standards for sports betting because those contracts are based on the outcomes of sporting events and “other events for which the outcome is uncertain.”

Coinbase’s event contracts are wagers,” according to the Nevada suit. “A user spends a sum of money to buy an event contract on an outcome of an event and receives a payout if the outcome occurs and not if the outcome does not occur.”

California-based Coinbase offers event contracts on its platform via a partnership with Kalshi.

Coinbase Leans Into Federal Preemption

As partner Kalshi and other prediction market operators have done, Coinbase is leaning into federal preemption — legal precedent indicating federal regulations supersede state guidelines — in its fight against Nevada. The Commodities Exchange Act (CEA) is central to that argument.

“Nevada’s enforcement of its state laws is preempted several times over,” according to the Coinbase suit. “The CEA’s grant of ‘exclusive jurisdiction’ to the Commodities Futures Trading Commission (CFTC) over event contracts traded on designated clearing markets (DCMs) forecloses any state claims. And pursuant to the CEA’s mandate, the CFTC has constructed a comprehensive regulatory regime to oversee both event-contract trading and the entities that facilitate these transactions.”

“Permitting States like Nevada to encroach on the CFTC’s jurisdiction would frustrate Congress’s efforts to guarantee nationwide uniformity in the futures market by subjecting companies like Coinbase to state laws that are fundamentally inconsistent with federal law requirements,” the crypto broker adds in its legal complaint. “Federal law leaves no room for concurrent state regulation in this field.”

Nevada Tough Territory for Prediction Markets

Home to Las Vegas and the most mature regulated sports betting market in the US, Nevada has taken a hard line against prediction markets and those companies’ efforts to offer sports derivatives in the state. Gaming entities and regulators there have, with success, pursued litigation against prediction firms.

For example, last November, US District Judge Andrew Gordon ruled Kalshi’s sports event contracts are essentially gambling. That ruling chased some other event contract exchanges’ sports offerings from the state. Last month, the NGCB filed a civil enforcement action against Kalshi rival Polymarket, saying that company’s sports derivatives are akin to sports betting and could potentially harm the state’s gaming-driven economy.

“Nevada’s public policy, as expressed by the Legislature, is that the gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants and therefore must be licensed, controlled, and assisted to protect the public health, safety, morals, good order, and general welfare of the inhabitants of the State,” said the regulator.