In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been promoting their prediction markets and acting as bookmakers, which is deemed a violation of state laws. The NYAG's office has pointed out that the platforms' behavior is akin to gambling, with users being referred to as 'bettors' and each contract being considered a 'bet.' Furthermore, the lawsuit highlights that the platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21.
The lawsuit against Coinbase stated, '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 action against prediction market providers, as Nevada, Washington, and others have filed similar lawsuits. This issue is now being considered by multiple appeals courts and may eventually be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer Paul Grewal has asserted that prediction markets are federally regulated national exchanges and that the company will fight for federal oversight.
Gemini, on the other hand, has declined to comment. The Commodity Futures Trading Commission Chairman has argued that prediction markets fall under his agency's exclusive jurisdiction, and the CFTC has taken action to block charges against prediction market providers in several states. Kalshi, a major prediction market provider, was not named as a defendant but has preemptively sued the New York State Gaming Commission. New York State Attorney General Letitia James has stated that both Gemini and Coinbase's products are '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.'