In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been promoting their prediction markets and acting as bookmakers, which is deemed a violation of state laws. The lawsuit highlights that users are essentially 'bettors' and that each contract can be viewed as a bet, further emphasizing the gambling aspect. Additionally, it is noted that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's laws that prohibit gambling on mobile apps for those under 21.
The lawsuit against Coinbase states, '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.' This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers, arguing that their sports and entertainment products are indeed a form of gambling and not federally regulated swaps. The issue is currently being deliberated in multiple appeals courts and is likely to be brought before the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated national exchanges and that the company will advocate for federal oversight.
Gemini, on the other hand, has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has expressed his view that prediction markets 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 also sought to join another case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not included in the lawsuit and had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform.
New York State Attorney General Letitia James has 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.'