In a recent development, New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which encompass sports, entertainment, and elections, are in violation of state gambling laws. The lawsuit contends that these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers. Furthermore, the lawsuit highlights that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law barring anyone under 21 from participating in mobile app gambling.
The New York Attorney General's office has described the behavior of these prediction market platforms, referring to users as 'bettors' and characterizing each contract as a 'bet.' 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 products constitute gambling rather than 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, Paul Grewal, has stated that prediction markets are subject to federal regulation and that the company will advocate for federal oversight. Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, asserting that prediction markets fall under the agency's jurisdiction. Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit and is currently awaiting a federal court ruling on whether state gambling laws apply to its platform. New York State Attorney General Letitia James has characterized the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.