Lawyers for the city of Detroit plan to file an amicus brief in Coinbase’s lawsuit against the state of Michigan, arguing federal regulators—not states—should oversee prediction markets.
In a Thursday filing in the US District Court for the Eastern District of Michigan, Judge Shalina Kumar approved an order allowing Detroit to submit a brief supporting state officials in their motion for a preliminary injunction. Detroit’s lawyers were given until April 3 to make the filing as the case proceeds.
Coinbase sued Michigan as well as gaming authorities in Connecticut and Illinois in December, more than a month before the crypto exchange announced the rollout of its prediction market services. The company contends that prediction markets fall under the purview of the US Commodity Futures Trading Commission (CFTC) rather than state gambling regulators, challenging Michigan’s enforcement actions.
Platforms offering event-contract bets on prediction markets—such as Coinbase, Kalshi and Polymarket—are facing state-level lawsuits in several jurisdictions. CFTC Chair Michael Selig has publicly backed bringing the products under federal oversight and has proposed new rules for the commission, but as of Friday it remained unclear how the legal dispute between state authorities and federal regulators will resolve.
“The more the CFTC can do in this space [prediction markets] to put a comprehensive regulatory regime around it, the more likely it is for courts who are looking at the issue to say ‘actually, yes, this is a CFTC jurisdiction issue — this really is not just an end run around sports gambling bans in particular states,’” Stephen Piepgrass, a partner at international law firm Troutman Pepper Locke, told Cointelegraph.
Piepgrass said the disputes could ultimately return to the US Supreme Court, citing its 2018 decision in Murphy v. National Collegiate Athletic Association, which restored to states the authority to regulate sports betting by striking down a federal prohibition.
States have pushed back against prediction-market platforms, and court outcomes have been mixed. This month, a judge ordered Kalshi to temporarily stop operating in Nevada, and the platform faces criminal charges in Arizona over alleged illegal gambling tied to sports and elections. By contrast, a Tennessee judge blocked state authorities from enforcing gambling laws against Kalshi in February.
The Michigan Gaming Control Board reported Detroit casinos generated more than $200 million in revenue for January and February, providing upward of $24 million in taxes for the state.
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