In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling activities. 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 lawsuit also highlights that these platforms allow users between the ages of 18 and 21 to place bets, despite New York's ban on gambling for individuals under 21 on mobile apps.
The New York Attorney General's office has described the behavior of these prediction market platforms as essentially gambling, where users stake money on the outcome of events beyond their control, with the understanding that they will receive something of value based on the outcome. This lawsuit is part of a larger trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related products are indeed a form of betting and not federally regulated swaps.
The issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated national exchanges and that the company will fight for federal oversight.
On the other hand, Gemini has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that prediction markets, including those related to sports, fall under the exclusive jurisdiction of his agency. 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 in the lawsuit 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 has stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is still subject to regulation under state laws and the Constitution.