In a recent lawsuit, New York targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit claims that these platforms facilitate betting on sports, entertainment, and elections, thereby violating state gambling regulations. According to the lawsuit, the companies' advertising strategies and their role as bookmakers underscore the gambling nature of these prediction markets. Furthermore, the platforms allegedly permit individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from engaging in mobile app gambling.
The state's argument is that the prediction market platforms are essentially providing gambling services, where users stake money on the outcome of events beyond their control, with the understanding that they will receive something of value based on the outcome. This lawsuit is the latest in a series of actions taken by states, including Nevada and Washington, against prediction market providers. The issue is currently being deliberated in multiple appeals courts and may eventually be heard by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, asserted that prediction markets are federally regulated national exchanges and that the company would advocate for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, stating that prediction markets, including those related to sports, fall under the agency's exclusive jurisdiction. Another prediction market provider, Kalshi, was not named in the lawsuit but has previously taken 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 described both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.