On Tuesday, New York filed lawsuits against Coinbase and Gemini, alleging that their predictive market products, which involve sports, entertainment, and elections, are in violation of state laws regulating gambling. The lawsuits contend that these offerings are essentially unlicensed gambling products, citing the manner in which the companies promote their predictive markets and their role as bookmakers. The New York Attorney General's office described the behavior of these platforms as allowing users, referred to as 'bettors,' to place 'bets,' with each contract essentially being a wager. Furthermore, the suits argue that these platforms enable individuals between the ages of 18 and 21 to place bets, despite New York's prohibition on gambling for those under 21 on mobile apps.
The lawsuit against Coinbase stated, 'As described, the respondent's platform offers quintessential gambling, allowing a bettor to stake money on the outcome of a chance event or future contingency beyond their control, with the understanding of receiving something of value based on the outcome.' New York is the latest in a series of states to take legal action against predictive market providers over their sports and entertainment offerings, following the footsteps of Nevada, Washington, and others, who argue that at least sports-related bets constitute gambling rather than federally regulated swaps. This 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, Paul Grewal, stated on social media that 'predictive markets are federally regulated national exchanges' and that Coinbase would advocate for federal oversight. Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has maintained that predictive markets, including those related to sports, fall under the exclusive jurisdiction of his agency. The CFTC has filed lawsuits against several states to prevent them from pursuing charges against predictive market providers.
Kalshi, a major predictive market provider, was not named in the lawsuit and had 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 described the products offered by Gemini and Coinbase as 'illegal gambling operations,' stating, 'Gambling by any other name is still gambling and is subject to our state laws and Constitution.'