The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which cover sports, entertainment, and election outcomes, are in violation of state laws governing gambling. According to the lawsuit, these platforms are essentially providing unlicensed betting products, with the companies acting as bookmakers and users being referred to as 'bettors'. The lawsuit also points out that these platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's law prohibiting anyone under 21 from participating in mobile gambling.
The NYAG's office contends that the nature of these prediction markets constitutes gambling, where users stake money on the outcome of events beyond their control, with the expectation of receiving something of value if their prediction is correct. This lawsuit is part of a broader trend, with states like Nevada and Washington taking similar action against prediction market providers, arguing that such offerings, especially those related to sports, are indeed a form of betting and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to be heard by the US Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated and that Coinbase will advocate for federal oversight.
Gemini has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that prediction markets fall under the agency's jurisdiction, and the CFTC has taken legal action to block states from charging prediction market providers. Kalshi, a major prediction market provider, was not named in the lawsuit but has previously taken preemptive legal action against 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 described the offerings by Gemini and Coinbase as 'illegal gambling operations', emphasizing that regardless of the terminology used, gambling is subject to regulation under state laws and the Constitution.