In a lawsuit filed on Tuesday, New York targeted Coinbase and Gemini, contending that their prediction market products, which involve sports, entertainment, and elections, are in fact unlicensed gambling products. According to the lawsuit, the manner in which these companies advertise their prediction markets and their role as bookmakers on the platforms supports this claim.
The New York Attorney General's office described the behavior of these platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' Furthermore, the lawsuit argues that these platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's prohibition on gambling for those under 21 on mobile apps. The lawsuit against Coinbase states, 'As described above, what Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' New York is not the only state to take legal action against prediction market providers over their sports and entertainment offerings, as states such as Nevada and Washington have also filed lawsuits, arguing that at least the sports-related bets constitute gambling rather than federally regulated swaps.
This issue is currently before multiple appeals courts and may eventually be heard by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer Paul Grewal stated on social media that 'prediction markets are federally regulated national exchanges' and that Coinbase would 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 agency's 'exclusive jurisdiction.' The CFTC has taken legal action against several states to prevent them from pursuing charges against prediction market providers. Kalshi, a major prediction market provider, was not named in the lawsuit and had previously taken preemptive legal action against the New York State Gaming Commission.
New York State Attorney General Letitia James described the products offered by Gemini and Coinbase as 'illegal gambling operations,' stating, 'Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'