A federal judge in Nevada has shut down Coinbase Financial Markets Inc.’s last-ditch effort to stop state gambling regulators from cracking down on its event-based trading products, clearing the way for the case to continue in state court.

In a February 7 order, U.S. District Judge Cristina D. Silva denied Coinbase’s request for a temporary restraining order and a preliminary injunction. She also dismissed the company’s federal lawsuit without prejudice, ending the case and sending the dispute back where it started.

That leaves Coinbase facing an active civil enforcement action in Carson City, brought by the Nevada Gaming Control Board. State regulators allege the company has been offering illegal gambling products in Nevada without the licenses required under state law.

At issue are event contracts tied to the outcomes of sporting events and other real-world occurrences. Nevada regulators say those contracts function like sports betting and fall squarely under the Nevada Gaming Control Act. Coinbase argues they are financial derivatives regulated at the federal level, not gambling, and therefore outside the state’s authority.

Judge Silva never reached that central disagreement. Instead, she focused on whether a federal court could intervene at all while Nevada’s enforcement case is already underway.

Why the federal court stepped aside

The state case was filed by the Nevada Gaming Control Board earlier this mon...