An interesting development in the dispute between Coinbase and U.S. states. Ryan Vanhrak, the company’s Vice President for Legal Affairs, directly accuses government regulators of manipulating prediction markets.

At its core, this is about who has the right to control contracts for sports events. Coinbase launched such markets together with Kalshi and is now suing several states—Connecticut, Illinois, Michigan, and Nevada. These states say this is illegal gambling and have issued cease-and-desist letters.

Vanhrak calls it gaslighting. In his view, the states claim that, without their intervention, the markets would remain unregulated due to the limited resources of the CFTC. But that is simply not true—the Commodity Futures Trading Commission has long been overseeing multi-trillion-dollar derivatives markets. Even recently, it has issued reminders about violations related to insider information in event contracts.

The central issue is jurisdiction. The Commodity Exchange Act gives the CFTC exclusive authority over swaps and derivatives, including event contracts. There is even a special rule that allows the federal commission to prohibit such contracts on public policy grounds. The states are trying to get around this by excluding sports contracts from the federal definition of swaps, but this has no support in either the law or judicial precedents.

By the way, exchange-traded contracts on Kalshi are fundamentally different from traditional sportsbook betting. On an exchange, buyers and sellers set prices themselves under CFTC oversight. In betting shops, the operator sets the odds and takes the other side—this is regulated by the states. No one is saying that the CFTC controls bookmakers; only that exchange-traded contracts must fall under federal law.

Overall, this is a broader problem. Fragmented oversight in the crypto industry creates chaos. Vanhrak notes that states have the right to protect consumers and fight fraud, but subordinating national derivatives markets to a “patchwork of 50 regulators” will undermine investor trust. Congress has long chosen a single federal framework for derivatives, and prediction markets should be considered without any exceptions.