In a recent lawsuit, New York has targeted Coinbase and Gemini, contending that their predictive market products, which encompass sports, entertainment, and election outcomes, are in fact unlicensed gambling products. The lawsuit highlights how these companies have advertised their predictive markets and their role as bookmakers, likening user interactions to betting. Furthermore, it criticizes the platforms for allowing 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 NYAG's office emphasizes that each contract on these platforms constitutes a bet, with users essentially staking money on the outcome of events beyond their control.
This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps, arguing that at least sports-related bets should be classified as gambling rather than federally regulated swaps. The issue is currently pending before multiple appeals courts and is likely to be reviewed by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that predictive markets are federally regulated national exchanges and that the company will advocate for federal oversight.
Gemini, on the other hand, has declined to comment. The Commodity Futures Trading Commission Chairman, Mike Selig, has supported the stance that predictive markets, including those related to sports, fall under the agency's jurisdiction. Meanwhile, Kalshi, a significant predictive market provider, was not named in the lawsuit but has previously taken preemptive legal action against 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 has described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and the Constitution.