The state of New York has filed lawsuits against Coinbase and Gemini, alleging that their prediction market products, which involve sports, entertainment, and elections, are in violation of state laws governing gambling. According to the lawsuits, these products are essentially unlicensed gambling offerings, as evidenced by how they are advertised and the role the companies play in managing the platforms.
The New York Attorney General's office has characterized the behavior of these platforms as allowing users to place bets, with each contract being deemed a bet. Furthermore, the suits argue that the platforms permit individuals between the ages of 18 and 21 to place bets, which contradicts New York's law that prohibits anyone under 21 from engaging in mobile app gambling. The lawsuit against Coinbase states, "What the respondent offers through its platform is, in essence, gambling, as it allows a bettor to stake money on the outcome of an event not under their control, with the understanding that they will receive something of value if a certain outcome occurs." This action by New York is part of a broader trend, as states like Nevada and Washington have also taken legal action against providers of prediction market products, contending that at least those related to sports are indeed bets and not federally regulated swaps.
This issue is now being considered by 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 federally regulated national exchanges and that the company will advocate for federal oversight. Gemini declined to comment on the matter.
The Chairman of the Commodity Futures Trading Commission, 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 joined 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 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 by another name is still gambling and is not exempt from regulation under our state laws and Constitution."