Judge to Coinbase on prediction-market preemption: 'applesauce'

A federal judge in Michigan has denied Coinbase's bid to bar the state from enforcing its gambling laws against the exchange's planned sports event contracts, ruling that Coinbase had not shown it is likely to win on the merits of its preemption claim.

U.S. District Judge Shalina Kumar of the Eastern District of Michigan issued the ruling Thursday, according to The Block, which quoted from the opinion. The line doing the rounds: "Coinbase's averments are, in a word, applesauce" — an echo of Justice Antonin Scalia's "pure applesauce" in his King v. Burwell dissent. Kumar also wrote that it "is not impossible for Coinbase to comply with the LSBA simply because it is costly and challenging," and concluded that Coinbase "has not carried its burden to establish the factors required for a preliminary injunction."

The dispute is jurisdictional. Coinbase sued Michigan in December 2025 — alongside Illinois and Connecticut — arguing that event contracts sit exclusively with the Commodity Futures Trading Commission under the Commodity Exchange Act, and that Michigan's Lawful Sports Betting Act is conflict-preempted because dual compliance is impossible and state rules frustrate a uniform federal scheme. Coinbase's plan is to route customers, Michigan residents included, to event contracts offered by Kalshi. Kumar rejected both prongs, holding Coinbase had not established that sports event contracts are swaps under the CEA.

The CFTC has been running a parallel campaign, suing states directly: Wisconsin, Illinois, Arizona, Connecticut, New York, New Mexico, Minnesota and Rhode Island, with Kentucky the ninth in June, per The Block. Also in June, the agency floated rules that would keep sports-linked contracts viable over state regulators' objections.

Key facts

• Ruling: preliminary injunction denied, E.D. Mich., Judge Shalina Kumar, Thursday (The Block, quoting the opinion).
• Coinbase's suits against Michigan, Illinois and Connecticut: filed December 2025 (The Block).
• States sued by the CFTC: nine, Kentucky most recent, June 2026 (The Block). The named list plus Kentucky totals nine — internally consistent.
• Coinbase had not commented at publication; The Block said it had reached out.

The real-world read

A preliminary-injunction denial is a probability call, not a verdict — Coinbase can still litigate and lose or win later, and can appeal. Treat "court rules against Coinbase" framing accordingly.

Coinbase Chief Legal Officer Paul Grewal's December line — that prediction markets are "neutral exchanges, indifferent to price," unlike casinos that "win only if you lose" — is a litigant's framing, and it is not what Kumar tested. She asked whether these contracts are swaps under the CEA and found Coinbase hadn't shown it. Being structurally unlike a sportsbook doesn't answer that.

Unsaid: whether Michigan has actually initiated enforcement, whether Coinbase will appeal, and where the Illinois and Connecticut cases stand.

Context on the messenger: The Block discloses Foresight Ventures as its majority investor, with exchange Bitget an anchor LP for Foresight. Its page also carried promotional units for LMAX Digital and a Polymarket-branded explainer — advertising sitting beside coverage of the prediction-market fight, not reporting.

Opinion, and whose

Grewal (December 2025, Coinbase): state efforts "stifle innovation and violate the law." That is Coinbase's legal position, now rejected at this stage by Kumar. No forecast from the court on final outcome.

Sources

• The Block, Timmy Shen — the ruling, quoted passages from Kumar's opinion, the December 2025 suits, Grewal's statement, and the CFTC's state litigation tally. Secondary; it quotes the opinion directly but the docket entry itself wasn't reproduced. The Block's ownership disclosure is noted above. No sponsored material was used, though the page hosted exchange ads.

Not financial advice.