On Tuesday, New York filed lawsuits against Coinbase and Gemini, arguing that their prediction market offerings, which involve sports, entertainment, and elections, contravene state gambling regulations. According to the lawsuits, 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 noted that the platforms refer to users as 'bettors' and describe each contract as a 'bet', further emphasizing their gambling nature.
Moreover, the platforms allegedly allow individuals between 18 and 21 years old to place bets, despite New York's prohibition on gambling for those under 21 on mobile apps. The lawsuit against Coinbase stated, 'What the respondent offers through its platform is quintessentially gambling: it allows a bettor to stake or risk money on 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 they will receive something of value in the event of a certain outcome.' New York is not the only state to take action against prediction market providers; other states like Nevada and Washington have also filed similar lawsuits, arguing that sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently being addressed by multiple appeals courts and may eventually be heard by the US Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated on social media that prediction markets are federally regulated national exchanges and that Coinbase will advocate for federal oversight.
Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that prediction markets fall under his agency's exclusive jurisdiction. The CFTC has taken legal action against several states to prevent them from charging prediction market providers and has filed to join another case in Nevada to defend these providers.
Kalshi, a major prediction market provider, was not named as a defendant and had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James released a statement, describing both Gemini and Coinbase's products as 'illegal gambling operations', emphasizing that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution'.