The state of New York has filed lawsuits against Coinbase and Gemini, alleging that their prediction market offerings, which involve sports, entertainment, and elections, are in violation of state gambling laws. According to the lawsuits, these offerings are essentially unlicensed gambling products, with the companies acting as bookmakers and advertising their prediction markets in a manner that is deemed to be in violation of the law.
The lawsuits also highlight that the platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps. The state argues that the prediction market platforms are facilitating gambling by allowing users to stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if their prediction is correct. This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction 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 U.S. Supreme Court. In response, Coinbase's Chief Legal Officer has stated that prediction markets are under federal regulation and the company will advocate for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets fall under its jurisdiction, and has taken legal action to block states from pursuing charges against these providers.