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. Furthermore, the lawsuit highlights that these platforms allow individuals between the ages of 18 and 21 to participate, despite New York's prohibition on gambling for those under 21 on mobile apps. The lawsuit describes the behavior of these platforms as 'quintessentially gambling,' where users stake money on the outcome of events beyond their control.
This legal action is the latest in a series of lawsuits filed by states, including Nevada and Washington, which argue that such prediction market products 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 heard by the U.S. Supreme Court.
In response, Coinbase has stated its intention to fight for federal oversight, arguing that prediction markets are federally regulated national exchanges. Gemini has declined 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. The lawsuit against Coinbase and Gemini marks a significant development in the ongoing debate over the regulation of prediction markets and their classification as gambling products.