Coinbase is joining a long line of prediction market sites that are shutting down operations in the state of Michigan. Per reports, the cryptocurrency platform has agreed to pull out of the state while it fights Michigan due to repeated challenges over the industry’s definition.
Michigan contests that prediction markets are unlicensed sportsbooks, while Coinbase and other sites like it claim they are federally backed exchange platforms. Given the impasse, Coinbase is forced to cease offering sports-related event contracts in the state.
Coinbase Joins Kalshi & Robinhood in MI Exit
Coinbase Financial Markets has officially pulled out of Michigan and will no longer be offering sports-centric event contracts to residents in the state. The Michigan Gaming Control Board has also requested the company to close out any lingering contracts.
This follows a similar exit by Robinhood, while Kalshi is still facing a preliminary injunction that will keep its event contracts out of the state.
Coinbase’s move is viewed as temporary, and per the company, is not verification that the site violates Michigan state law. The state will also opt not to take further action against prediction markets like Coinbase that have agreed to cease operation.
Michigan and Prediction Markets Don’t See Eye to Eye
Michigan officials have contested prediction markets, stating that their event contracts function effectively just like sports betting wagers. The state does allow regulated sports betting, but requires all sportsbooks to pay licensing fees and taxes.
Due to their definition of what gambling is and what their guidelines for sportsbooks are, Michigan believes prediction market platforms should comply with state gambling laws and regulations. Since the companies refuse to be defined as gambling entities, the two sides can’t agree to a resolution, prompting Coinbase’s exit from the state.
Coinbase isn’t alone, of course. Kalshi is still fighting against restrictions in the state, while any prediction market refusing to embrace Michigan’s online gambling laws is being turned away.
Prediction Markets Continue to Face Nationwide Regulatory Battle
Michigan isn’t alone in its fight against prediction markets. Several states have either requested various prediction market platforms to cease operation, or have flat out won legal battles against them already.
Minnesota successfully passed a law making prediction markets illegal in the state, while Nevada, Connecticut, and several other states have maintained strict stances against the industry. Other states such as Wisconsin, Arizona, New York, and Illinois are in active litigation with the CFTC or other federal regulators.
The Trade Handle Prediction Markets Take
Coinbase joining a growing list of prediction market sites exiting Michigan has to be viewed as a mild setback, but it’s not shocking news. Kalshi and Robinhood were already forced out, and Michigan also is far from the first state to pound the table over prediction market regulation.
While Michigan and other states want to put prediction markets in a box, the reality is they simply don’t fit in their outdated definition. Prediction markets are not sports betting sites, but rather a distinctive avenue for people to trade on real-world outcomes.
Kalshi CEO Tarek Mansour put it as simply as possible in a recent interview, stating that the user doesn’t compete with Kalshi, nor does Kalshi target the user. There is no “house” when it comes to prediction markets, and these sites don’t have incentive in targeting losing players or stifling winning players.
Long-term these setbacks need to happen. Eventually, prediction markets will be properly defined on a universal level, whether states like Michigan like it or not.