Coinbase has urged U.S. regulators to avoid introducing new rules for prediction markets, arguing that the sector already falls under existing derivatives law. The position came in a formal comment letter submitted to the Commodity Futures Trading Commission in response to its request for input on event-based contracts.
Faryar Shirzad, Coinbase’s chief policy officer, outlined the exchange’s stance in public remarks on May 3. He stressed that the core mechanics behind prediction markets do not represent a regulatory gap.
“Event-based contracts are not new,” Shirzad wrote, adding that such instruments “sit comfortably within existing statutory authority, no new mandate required.”
The letter, addressed to CFTC Secretary Christopher Kirkpatrick, described prediction markets as “one of the most dynamic areas of derivatives markets,” while maintaining that a principles-based regulatory approach remains sufficient.
Coinbase submitted a comment letter to the @CFTC on prediction markets. Four points from @coinbase’s submission:
— Faryar Shirzad 🛡️ (@faryarshirzad) May 3, 2026
1) Event-based contracts are not new. The CFTC has long overseen derivatives and futures markets that embed real-world contingencies. Prediction markets may look… pic.twitter.com/sc1XS1rU2q
Industry debate intensifies over oversight
The CFTC’s Advance Notice of Proposed Rulemaking in March triggered a broad response across the industry. The regulator received more than 1,500 comment letters from companies, platforms, and consumer groups.
Coinbase’s position aligns with several major firms that favor federal oversight under the existing framework. Venture capital firm Andreessen Horowitz, also known as a16z, submitted its own response supporting the role of the CFTC.
Miles Jennings, head of policy at a16z, described prediction markets as “one of the most powerful tools we have for turning dispersed knowledge into actionable information,” adding that prices reflect “genuine conviction, not casual opinion.”
Other platforms echoed similar views. Polymarket supported keeping the CFTC as the primary regulator, while Kalshi called for clearer guidance within the current system rather than new legislation.
Federal versus state control remains contested
Despite industry alignment on federal oversight, opposition from state-level regulators continues to shape the debate. Bodies such as the Pennsylvania Gaming Control Board and the Tennessee Sports Wagering Council have argued that prediction markets resemble unlicensed gambling products.
This divide reflects a broader jurisdictional conflict. Coinbase warned in its submission that fragmented, state-by-state regulation could undermine consistency in markets that operate across borders.
“Congress assigned this domain to the CFTC for a reason: consistent, national oversight of derivatives markets,” Shirzad wrote.
The dispute has already reached legal channels. Coinbase, Polymarket, and Kalshi are involved in ongoing cases with multiple state authorities over the classification and legality of event-based contracts.
Economic function at the center of argument
Coinbase’s argument centers on the economic role of prediction markets rather than their novelty. The company compared these instruments to traditional futures contracts, which also rely on real-world outcomes.
“Like futures markets, these instruments aggregate dispersed information into prices,” Shirzad stated, adding that they provide a mechanism for hedging uncertainty.
The exchange also emphasized that the CFTC already holds enforcement powers. According to the letter, the regulator can “review, condition, or prohibit contracts that are contrary to the public interest,” including those that raise concerns around manipulation or harm.
This position suggests that targeted enforcement, rather than new legislation, should address edge cases within the market.
Growth meets regulatory scrutiny
Prediction markets have expanded rapidly in recent years, with platforms reporting higher activity levels and broader participation. Coinbase described this growth as a reflection of demand for tools that “aggregate information” and “democratize access to predictive data.”
At the same time, scrutiny from lawmakers and advocacy groups has increased. Some critics have raised concerns about contracts tied to elections or geopolitical events, arguing they could influence real-world outcomes.
Consumer advocacy group Better Markets called for tighter restrictions on such products. Platforms have responded with internal safeguards. Polymarket and Kalshi have restricted access for certain categories of users, including politicians, in an effort to reduce risks tied to insider information.
Parallel policy efforts add pressure
Coinbase’s engagement with the CFTC comes amid broader involvement in U.S. crypto policy. Shirzad also addressed discussions around stablecoin regulation tied to the proposed CLARITY Act.
In comments to Reuters, he said revised legislative language preserved “what matters” for crypto platforms while introducing limits on rewards that resemble bank interest. The bill, negotiated by lawmakers including Senators Thom Tillis and Angela Alsobrooks, aims to set clearer boundaries for digital asset services.
The Senate Banking Committee is expected to review the legislation in the week of May 11, which places additional attention on how federal agencies approach digital asset oversight.
Market response remains measured
Shares of Coinbase, listed under Coinbase Global Inc., rose more than 1% in after-hours trading following Shirzad’s comments. Retail sentiment tracked by Stocktwits remained in the neutral range, though discussion volume increased over the same period.
The reaction reflects a market that continues to weigh regulatory clarity against ongoing uncertainty. Coinbase’s latest filing adds to a growing body of industry input that seeks to shape how prediction markets evolve under U.S. law.
Tanya Petrusenko
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