The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their predictive market products, which involve sports, entertainment, and election outcomes, are in violation of state laws governing gambling. According to the lawsuit, these products are essentially unlicensed gambling offerings, with the companies acting as bookmakers and advertising their platforms in a manner that encourages betting. The lawsuit also points out that these platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's laws prohibiting those under 21 from participating in mobile app gambling. The lawsuit states, "The respondent's platform offers quintessential gambling, allowing a bettor to stake money on the outcome of a chance event or a future event not under their control, with the understanding that they will receive something of value if a certain outcome occurs." This lawsuit is the latest in a series of actions taken by states, including Nevada and Washington, against predictive market providers, arguing that their sports-related products constitute gambling rather than federally regulated swaps.
The issue is currently before multiple appeals courts and is likely to be heard by the US Supreme Court. Coinbase's Chief Legal Officer, Paul Grewal, has stated that predictive markets are federally regulated national exchanges and that the company will fight for federal oversight. Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that predictive markets fall under the agency's exclusive jurisdiction, and the CFTC has taken legal action to block charges against predictive market providers in several states.
Kalshi, a major predictive 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," and that "gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution."