In a lawsuit filed on Tuesday, New York State has targeted Coinbase and Gemini, alleging that their prediction market products, which involve sports, entertainment, and election outcomes, are in fact unlicensed gambling offerings. According to the lawsuit, these platforms have been advertising their services and acting as bookmakers, which the state argues is a clear violation of its gambling laws. Furthermore, the lawsuit highlights that users of these platforms are referred to as 'bettors' and that each contract is essentially a bet, with the platforms allowing individuals between 18 and 21 to place bets, despite New York's laws prohibiting anyone under 21 from participating in mobile app gambling.
The lawsuit states, 'What the respondent offers through its platform is quintessentially gambling, allowing a bettor to stake money on the outcome of a chance event not under their control, with the understanding that they will receive something of value if a certain outcome occurs.' New York is not the first state to take this stance, as Nevada, Washington, and several others have also filed similar lawsuits, arguing that sports-related bets are indeed gambling and not federally regulated swaps. This 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 on social media that prediction markets are federally regulated national exchanges and that the company will fight for federal oversight. Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that prediction markets, including those related to sports, fall under the agency's exclusive jurisdiction.
The CFTC has taken action to block charges against prediction market providers in several states and has filed to join a case in Nevada to defend these providers. Another major prediction market provider, Kalshi, was not named in Tuesday's lawsuit but had previously taken preemptive action by suing 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 released a statement calling both Gemini and Coinbase's products 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from our state laws and Constitution.'