HOOD, COIN Stocks Gain Despite Fresh Lawsuit Calling Prediction Markets A ‘Public Nuisance’ – Challenging CFTC Authority

• Wisconsin filed lawsuits against five platorms platforms, alleging prediction market offerings tied to sports events create a “public nuisance.”
• It named Coinbase, Robinhood, Polymarket, Kalshi and Crypto.com.
• Other states, including Washington, New York, Arizona, and Tennessee, have also filed similar claims.

Shares of Robinhood (HOOD) and Coinbase (COIN) rose in early-morning trade on Friday despite a fresh lawsuit filed by the state of Wisconsin against the two, cracking down on prediction markets. 

The state’s Department of Justice (DOJ) filed three complaints and said sports -related event contract offerings were creating a “public nuisance.” The lawsuit also named Polymaket, Kalshi and Crypto.com.

"Thinly disguising unlawful conduct doesn't make it lawful.”

– Josh Kaul, Wisconsin Attroney General 

COIN’s stock rose more than 2% in pre-market trade as the cryptocurrency and equities markets moved higher after President Donald Trump said that Israel and Lebanon had agreed to extend their ceasefire by three weeks.

On Stocktwits, retail sentiment around the Brian Armstrong-led cryptocurrency exchange dipped to ‘bullish’ from ‘extremely bullish’ territory over the past day, while chatter remained at ‘high’ levels. 

Meanwhile, HOOD’s stock also gained more than 2% in pre-market trade. Retail sentiment around the company fell to ‘neutral’ from ‘bullish’ territory over the past day, and chatter fell to ‘normal’ from ‘high’ levels. 

State And Federal Regulators Clash Over Prediction Markets Oversight

This is not the first lawsuit to be filed against the two companies after their foray into prediction markets as states around the U.S. are attempting to discourage what they percieve to be “illegal gambling.”

Earlier this week, New York Attorney General Letitia James sued Coinbase and Gemini, alleging their prediction markets violate state gambling laws. Last month, Kalshi last month was sued Washington State Attorney General Nick Brown, who said its event-based contracts were akin to unregulated sports betting.

Tennessee and Arizona have also sued to prevent Kalshi from offering certain markets, while Arizona, Connecticut, and Illinois have issued cease-and-desist orders against prediction market operators.

However, the Commodity Futures Trading Commission’s (CFTC) new chairman, Michael S. Selig, has pushed back. He stated that the agency won’t sit “idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.” 

Earlier this month, the CFTC sued Connecticut, Arizona, and Illinois, challenging their efforts to regulate prediction market operators, including Kalshi and Polymarket. 

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