The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which involve sports, entertainment, and election outcomes, are in violation of state laws governing gambling. According to the lawsuit, these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers. The New York Attorney General's office has described the behavior of these platforms, referring to users as 'bettors' and characterizing each contract as a 'bet'. Furthermore, the lawsuit argues that these platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps.
The lawsuit states, '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 prediction market providers regarding their sports and entertainment products, as other states such as Nevada and Washington have also filed similar lawsuits. The issue is currently being considered by multiple appeals courts and may eventually be heard by the US Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated national exchanges and that the company will advocate for federal oversight.
Gemini has declined to comment on the matter. The Chairman of the Commodity Futures Trading Commission, Mike Selig, has argued that prediction markets fall under the exclusive jurisdiction of his agency. The CFTC has taken legal action against several states to prevent them from bringing charges against prediction market providers. Kalshi, a major prediction market provider, was not named as a defendant in the lawsuit and has previously 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 released a statement characterizing the products offered by Gemini and Coinbase as 'illegal gambling operations', emphasizing that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution'.