On Tuesday, New York filed lawsuits against Coinbase and Gemini, joining a growing list of states arguing that prediction market contracts involving sports, entertainment, and elections contravene state laws on gambling. According to the lawsuits, the prediction market offerings by Coinbase and Gemini are essentially unlicensed gambling products, as evidenced by their advertising strategies and the role they play as bookmakers on these platforms.
The New York Attorney General's office also highlighted the actual functioning of these prediction market platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' Furthermore, the lawsuits contend that these platforms permit individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for anyone under 21 using mobile apps. The lawsuit against Coinbase stated, 'As described above, what Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' New York is not the only state to take legal action against providers of prediction markets for their sports and entertainment products; Nevada, Washington, and several other states have filed similar lawsuits, arguing that at least the sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response, Coinbase Chief Legal Officer Paul Grewal posted on X (formerly Twitter) that 'prediction markets are federally regulated national exchanges' and that Coinbase would advocate for federal oversight.
A spokesperson for Gemini declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including those related to sports, fall under his agency's 'exclusive jurisdiction.' The CFTC has filed lawsuits against Arizona, Connecticut, and Illinois to prevent them from charging prediction market providers and has joined another case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named as a defendant on Tuesday. The company had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform.
This case is ongoing in the Southern District of New York courthouse. New York State Attorney General Letitia James stated that the products offered by both Gemini and Coinbase are 'illegal gambling operations.' 'Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,' she added.