Nevada Gaming Control Board takes legal action to halt Coinbase sports contracts

• Nevada regulators have filed a civil enforcement action against Coinbase in Carson City District Court.
• The Board has deemed Coinbase’s event contract offerings unlawful in Nevada and in violation of state gaming laws.
• Nevada seeks a court declaration and injunction to stop Coinbase from offering unlicensed wagering to state residents.

The Nevada Gaming Control Board has taken legal action against Coinbase Financial Markets, Inc., filing a civil enforcement complaint in District Court that declares the cryptocurrency exchange’s operations unlawful in the state.

The Board filed the action on Monday, 2 February, seeking to stop Coinbase from offering what regulators classify as unlicensed wagering.

In its complaint filed in the District Court for Carson City, the NGCB asked the court for a declaration and injunction to halt unlicensed wagering in violation of Nevada law. The Board has deemed Coinbase’s operations unlawful and in violation of NRS 463.160, NRS 463.350, NRS 465.086, and NRS 465.092.

Event contracts classified as wagering activity

Coinbase is a CFTC-registered Futures Commission Merchant that serves as an intermediary for customers trading regulated derivatives listed on a Designated Contract Market operated by a third party. The company offers event contracts for sale on its mobile app, which are made available to people in Nevada.

The Board considers offering sports event contracts, or certain other event contracts, to constitute wagering activity under NRS 463.0193 and 463.01962. Under Nevada law, entities offering such event contracts must be licensed by state gaming authorities. Coinbase has not obtained the required gaming licence to operate in Nevada.

“The Board takes seriously its obligation to operate a thriving gaming industry and to protect Nevada citizens. The action taken yesterday reinforces this obligation,” said Mike Dreitzer, Chairman of the Nevada Gaming Control Board.

Federal versus state regulatory authority

The case highlights tensions between federal and state regulatory frameworks for event contracts. Coinbase’s CFTC registration as a Futures Commission Merchant does not exempt the company from state gaming licensing requirements, according to Nevada regulators.

The CFTC approved certain event contracts for trading in 2024, creating a regulatory landscape where companies may hold federal approval whilst facing state-level enforcement. Each state maintains authority to define and regulate wagering within its borders.

Nevada’s public policy, as expressed by the Legislature, is that the gaming industry is vitally important to the economy and general welfare of inhabitants. The state requires that gaming operations must be licensed, controlled, and assisted to protect public health, safety, morals, good order, and general welfare.

Industry implications

If the court grants the NGCB’s requested declaration and injunction, Coinbase would be prohibited from offering event contracts to Nevada residents. The company could face additional penalties for past violations of Nevada gaming statutes.

The Nevada action may prompt other states to examine event contract offerings through cryptocurrency platforms. Licensed gaming operators in Nevada, who have invested substantially in regulatory compliance, may view the enforcement action as protecting the integrity of the state’s licensed gaming framework.

The case raises questions about whether federal CFTC oversight pre-empts state gaming regulation, or whether states retain authority to require separate licensing for activities they classify as wagering.

Nevada’s escalating prediction market crackdown

The action against Coinbase represents the latest in a series of enforcement measures by Nevada regulators targeting prediction market platforms. In January, a Nevada court issued a temporary restraining order against Polymarket operations, marking another instance of the state asserting jurisdiction over event contract offerings.

The regulatory pressure has created tensions within the gambling industry itself. FanDuel and DraftKings left the American Gaming Association to pursue prediction market opportunities, highlighting divisions between traditional operators and those seeking to enter the event contracts space.

The conflict intensified when FanDuel and DraftKings subsequently exited Nevada operations over disagreements regarding prediction markets, demonstrating the state’s firm stance on licensing requirements.

Nevada’s regulatory environment has also impacted traditional gaming companies. Harald Neumann resigned as Ainsworth CEO following a Nevada licence setback, showing the quick consequences of failing to meet the state’s stringent regulatory standards.

Legal resolution of jurisdictional questions could shape the future of event contract markets across the United States and determine how operators can serve customers across multiple jurisdictions whilst maintaining legal compliance.