A Nevada state court has rejected an attempt by state regulators to immediately halt Coinbase’s newly-launched prediction markets, marking a setback for the Nevada Gaming Control Board in its bid to block the popular crypto exchange’s event-based trading products under state gaming laws.
Paul Grewal, Coinbase’s chief legal officer, stated that the court ruled a hearing set to take place next week. At this hearing, the firm will be allowed to present its case.
On Monday, the Nevada Gaming Control Board (NGCB) filed a civil enforcement action in the First Judicial District Court in Carson City, accusing Coinbase of offering unlicensed gambling through sports and other real-world outcome contracts without a Nevada gaming license. The complaint alleged that such contracts, including wagers related to sporting events and elections, fall under the state’s strict gaming statutes and require a license normally reserved for casinos and sportsbooks.
NGCB sues Coinbase, initiating a significant legal battle
The Nevada Gaming Control Board sued Coinbase in Carson City, alleging that the company is offering bets on unlicensed sports-event contracts and calling on authorities to take action. To halt its operation, the Nevada state governmental agency submitted a request for a TRO and a preliminary injunction to restrict resident access to these products.
Coinbase responded to this request, claiming that the nature of Nevada’s order was overbroad and would effectively prohibit the issuance of any event contracts regulated under the requirements of the Commodity Futures Trading Commission (CFTC) in the state. This includes contracts that determine financial or commodity outcomes. Notably, the crypto exchange filed this complaint on Tuesday, February 3.
Apart from this argument, the company also defended itself in court, alleging that the agency’s claims lack evidence to back them further, noting that they did not pose any harm since Kalshi, which chose Coinbase Custody to safeguard their USDC, could still offer those products directly to consumers in Nevada while the litigation process is ongoing.
Moreover, Grewal stated that the cryptocurrency exchange filed a lawsuit in the US District Court for the District of Nevada, challenging the state’s enforcement actions as violations of federal law. According to him, Congress granted the CFTC exclusive authority over these listed contracts and retains the power to create the rules.
In this case, the CEO stated that, “the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps and event contracts traded on regulated exchanges,” further noting that, “Nevada’s attempt to classify these instruments as state-regulated gambling is overridden by Congress’s rules on derivatives.”
Several US states express disapproval of the existence of prediction markets in the area
The Nevada Gaming Control Board regulatory push comes just weeks after Coinbase rolled out its prediction market product nationwide, powered through a partnership with CFTC-regulated exchange Kalshi, as part of its larger strategy to expand beyond traditional crypto trading. This broader launch has faced growing scrutiny from state regulators, who fear that unlicensed gambling could undermine consumer protections and state-licensed gaming businesses.
Regarding the NGCB and Coinbase’s legal battle, reports from sources revealed that their disagreement followed a 14-day temporary restraining order issued by a Nevada judge just days ago, which mandated that Polymarket halt specific event markets in Nevada.
At this point, analysts confirmed that several other US states are opposed to prediction markets, in addition to Nevada. To support this claim, a report from a reliable source dated January noted that Tennessee’s Sports Wagering Council (SWC), a government agency in the United States, notified several prediction markets, including Kalshi and Polymarket, to discontinue issuing sports-event contracts to its residents.
Meanwhile, amid regulatory crackdowns on prediction markets, Coinbase recently followed Kalshi’s lead by launching legal action against regulators in Connecticut, Illinois, and Michigan. The firm’s team stressed that prediction markets regulated under CFTC requirements should be subject to federal, rather than state, oversight.
Source: https://www.cryptopolitan.com/nevada-regulator-fails-to-secure-ban/
