In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have promoted their prediction markets and acted as bookmakers, effectively allowing users to place bets. Furthermore, it is claimed that the platforms permit individuals between the ages of 18 and 21 to engage in betting activities, which contradicts New York's laws prohibiting gambling on mobile apps for those under 21. The state's argument is that these prediction markets are, in essence, gambling operations where individuals can stake money on the outcome of events beyond their control, with the expectation of receiving something of value based on the outcome.
This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related bets are indeed a form of gambling and not federally regulated swaps. The issue is currently pending before multiple appeals courts and is likely to be reviewed by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer has stated that the company will advocate for federal oversight, emphasizing that prediction markets are federally regulated national exchanges. Gemini, on the other hand, has chosen not to comment on the matter. The Commodity Futures Trading Commission has also weighed in, asserting its exclusive jurisdiction over prediction markets, including those related to sports, and has taken legal action to block charges against prediction market providers in several states. Another key player, Kalshi, has preemptively 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 reiterated that both Gemini and Coinbase's products are considered 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and regulations.