In a recent lawsuit, New York targeted Coinbase and Gemini, contending that their prediction market products, which involve sports, entertainment, and elections, are in violation of state gambling laws. The lawsuit claims that these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers.
Furthermore, it highlights that the platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from participating in mobile app gambling. The state's argument is that these prediction markets are, in essence, gambling activities where users stake money on outcomes beyond their control, with the understanding that they will receive something of value based on the outcome.
This lawsuit follows similar actions by other states, including Nevada and Washington, which have also argued that such bets are indeed gambling and not 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, Paul Grewal, stated that prediction markets are federally regulated and that the company will advocate for federal oversight.
Gemini declined to comment on the matter. The Commodity Futures Trading Commission (CFTC) has also weighed in, with its Chairman, Mike Selig, asserting that prediction markets, including those related to sports, fall under the CFTC's exclusive jurisdiction.
The CFTC has taken legal action against several states to prevent them from charging prediction market providers. Another major prediction market provider, Kalshi, was not named in the lawsuit but 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 described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.