In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products constitute unlicensed gambling activities. According to the lawsuit, these platforms have been promoting their prediction markets and acting as bookmakers, which is deemed to be in violation of state laws.
The lawsuit also highlights the platforms' failure to adhere to age restrictions, allowing individuals between 18 and 21 to participate in betting activities, despite New York's ban on gambling for those under 21. The state's argument is that these prediction market platforms are, in essence, facilitating gambling by enabling users to stake money on the outcome of events beyond their control. This development is part of a broader trend, with multiple states, including Nevada and Washington, taking similar legal action against prediction market providers.
The issue is currently being deliberated in various appeals courts and is likely to be brought before the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer has asserted that prediction markets fall under federal regulation and has expressed the company's intention to advocate for federal oversight. Meanwhile, the Commodity Futures Trading Commission has also weighed in, arguing that these markets fall within its jurisdiction.
Another major prediction market provider, Kalshi, was not named in the lawsuit but has proactively sued the New York State Gaming Commission, seeking a ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James has denounced both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.