Coinbase Has Moved A Lawsuit Filed By New York Attorney General Letitia James From State Court To Federal Court, Escalating A Legal Battle Over Whether Prediction Markets Constitute Illegal Gambling.

The transfer came on Wednesday, one day after James sued Coinbase and @Gemini, alleging the two exchanges operated illegal gambling operations through their prediction market offerings.

Coinbase Chief Legal Officer Paul Grewal (@iampaulgrewal) announced the move on X, arguing that New York's claims involve "disputed and substantial questions of federal law." At the heart of the dispute is whether prediction markets fall under state gambling statutes or are subject to oversight by the Commodity Futures Trading Commission, the federal regulator that already governs event contracts of this kind. Grewal indicated Coinbase intends to argue that federal jurisdiction is where Congress intended such matters to be decided.

The federal transfer reframes the legal fight and could work in Coinbase's favour, given the CFTC's existing framework around prediction markets and the exchange's growing ties to federal regulators. Separately, Coinbase received conditional approval from the Office of the Comptroller of the Currency for a trust charter, moving it closer to formal federal banking status.

$COIN rose around 5% to $205.60 on Wednesday, suggesting investors viewed the federal court manoeuvre as a favourable development despite the lawsuit filed just a day earlier.