Coinbase has urged the Commodity Futures Trading Commission to retain authority over prediction markets, arguing that these products qualify as derivatives and should remain under federal oversight rather than being regulated individually by states.
In a formal submission, the company cautioned that allowing each state to impose its own rules could recreate the kind of regulatory disorder that federal derivatives laws were originally designed to prevent.
Faryar Shirzad, Coinbase’s Chief Policy Officer, outlined the firm’s position publicly, emphasizing that event based contracts are not a new concept. He noted that the CFTC has supervised similar derivatives tied to real world outcomes for decades. These instruments help consolidate dispersed information into pricing signals and provide tools for managing risk, much like traditional futures markets.
According to Coinbase, Congress intentionally placed oversight of such markets at the federal level to avoid inconsistent state by state regulation that could disrupt markets operating across borders. The company referenced warnings from lawmakers in 1974 about the confusion that would arise if multiple jurisdictions governed futures trading independently.
While acknowledging that the CFTC has the authority to restrict certain contracts, Coinbase argued that this power should be applied selectively. Specifically, the regulator can act against contracts that pose risks such as manipulation or those tied to harmful activities, but it should not be used to block an entire category of products that the company views as beneficial.
The exchange also pointed to recent academic research from the Federal Reserve suggesting that prediction markets can match or even outperform traditional forecasting methods.
A key part of Coinbase’s argument focuses on how the CFTC interprets its own Rule 40.11. The company claims the rule has often been treated as a broad prohibition, when in fact the law requires a two step evaluation. First, regulators must determine whether a contract falls into specific categories such as terrorism, assassination, or gaming. Then, they must separately assess whether that particular contract conflicts with the public interest.
Coinbase is now calling for clearer guidelines that explicitly reflect this two stage process. It also recommends updating regulatory guidance to better define how exchanges can prove that their contracts are resistant to manipulation.
The filing comes amid growing legal tensions over prediction markets. On April 22, the New York Attorney General filed a lawsuit against Coinbase regarding its offerings, while the company previously took legal action against states including Illinois, Michigan, and Connecticut after regulators attempted to restrict such markets under gambling laws.#crypto#cryptonews https://coinsignals.net https://t.me/coinsignalpublic
