In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have advertised their prediction markets and acted as bookmakers, with users being referred to as 'bettors' and each contract essentially being a bet.
Furthermore, the platforms have been accused of allowing 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 lawsuit against Coinbase emphasizes that the platform's offerings are, in essence, gambling, as they involve staking money on the outcome of events beyond the bettor's control. This development is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers over their sports and entertainment products. The issue is currently before multiple appeals courts and is likely to be reviewed by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer has stated that prediction markets are federally regulated and the company will advocate for federal oversight. Gemini, on the other hand, has declined to comment.
The Commodity Futures Trading Commission Chairman has argued that prediction markets fall under the agency's jurisdiction, and the CFTC has taken legal action to block charges against prediction market providers in several states. Another major prediction market provider, Kalshi, was not named in the lawsuit but has a pending case in the Southern District of New York courthouse, seeking a ruling that state gambling laws do not apply to its platform.
New York State Attorney General Letitia James has stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to state laws and regulations.