Coinbase Takes Legal Action Against Prediction Market Regulation

Coinbase is one of the leading cryptocurrency exchange platforms in the world. They certainly have a large customer base in the U.S. In recent expansion and diversification efforts, they have taken a stake in the growing predictions market gambling community.

With this vested interest in mind, Coinbase has announced that it will be suing the following three states for trying to restrict access to prediction market gambling: Connecticut, Illinois, and Michigan. The lawsuit is being filed under claims by the company that trying to restrict this access is unfair and would hinder future innovation.

Along with sweepstakes casinos, prediction market betting sites have been under scrutiny, particularly in states where online casino gambling is limited. At issue are the difficulties states are having in trying to regulate new forms of gambling that are difficult to regulate.

With this move, Coinbase is taking a leadership position among operators that offer this kind of gambling access. The uncertainty reaches far beyond the aforementioned states. In fact, as many as a dozen or so other states have expressed similar concerns, something operators are taking note of as they keep pushing the prediction community forward. The idea that many states could be affected one way or another by the results of these lawsuits has everyone's interest at a peak.

What are Prediction Markets?

Prediction markets are also referred to as betting and information markets. Some experts consider them to be similar to the futures odds betting markets that are offered by licensed sportsbooks. They serve as gambling markets where participants can wager on the outcome of special events or particular topics of interest. This might include events or topics such as

• Where financial markets might end up on a given day


• The outcome of presidential or senatorial elections


• Winners of awards - Grammys, Oscars, Emmys, etc.


• Weather predictions
  

Essentially, anything that is predictable could become a market worthy of betting.

Prediction markets work as follows. A prediction market exchange will post an event for wagering. It will list the possible outcomes and set betting odds related to the likelihood of each outcome. As the bets come in, the odds of each possible outcome will be adjusted to reflect market sentiment. Odds can also be adjusted for a variety of other reasons if something in a particular market suddenly changes. When wagers are made, the bettors get the odds listed at the time of their wagers.

Why Prediction Markets are Getting Scrutiny

Whenever betting is involved, consumer protections must be implemented. That usually becomes the responsibility of legislators at the state level. The biggest concern regulators have relates to the possibility of markets being manipulated by outside forces.

If these markets are going to gain favor nationwide, clear and consistent regulations must be put in place. Also, if an exchange is offering national events, access must be equal from one state to the next. Until this happens, it's reasonable to expect that state regulators and exchange providers like Coinbase are going to butt heads.