In a recent development, New York has taken legal action against Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit claims that these platforms facilitate betting on sports, entertainment, and elections, which is deemed to be in contravention of state gambling regulations. According to the New York Attorney General's office, the prediction markets operated by Coinbase and Gemini are essentially gambling platforms, where users can place bets on various outcomes.
The suits also highlight the fact that these platforms allow individuals between the ages of 18 and 21 to participate, despite New York's laws prohibiting anyone under 21 from engaging in mobile app gambling. The case against Coinbase states, "The respondent's platform is fundamentally a gambling operation, where a bettor can stake money on the outcome of a chance event or a future contingency beyond their control, with the understanding that they will receive something of value if a certain outcome occurs." New York is not the only state to take issue with prediction market providers, as Nevada, Washington, and several other states have filed similar lawsuits, arguing that sports-related bets are, in fact, a form of gambling and not federally regulated swaps. This matter is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, 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 Commodity Futures Trading Commission Chairman, Mike Selig, has asserted 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 as a defendant 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 stated that both Gemini and Coinbase's products are "illegal gambling operations," emphasizing that "gambling by another name is still gambling and is subject to regulation under our state laws and Constitution."