In a recent development, New York has taken legal action against Coinbase and Gemini, alleging that their prediction market offerings, which encompass sports, entertainment, and election-related contracts, are in violation of state gambling laws. According to the lawsuits filed, these platforms have been operating as unlicensed gambling products, with the companies acting as bookmakers and advertising their prediction markets in a manner that encourages betting.
Furthermore, the lawsuits highlight that these platforms permit individuals between the ages of 18 and 21 to place bets, which is in direct contravention of New York's laws that prohibit anyone under the age of 21 from participating in mobile app gambling. The New York Attorney General's office has described the behavior of these platforms as quintessentially 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 legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers, arguing that at least the sports-related bets constitute gambling rather than 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 asserted that prediction markets fall under federal regulation and has expressed its intention to fight for federal oversight.
Gemini, on the other hand, has declined to comment on the matter. The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets, including those related to sports, fall within its exclusive jurisdiction.
Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit but has preemptively sued 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 has characterized both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.