The state of New York has filed a lawsuit against cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms allow users to place bets on sports, entertainment, and election outcomes, which is deemed a violation of state gambling laws. The New York Attorney General's office argues that the platforms' advertising and operation of these markets, as well as their role as bookmakers, demonstrate that they are, in fact, facilitating gambling activities. Furthermore, the lawsuit claims that the platforms permit individuals between the ages of 18 and 21 to participate, despite New York's laws prohibiting those under 21 from engaging in mobile app gambling.
The lawsuit states, 'What the respondent offers through its platform is, in essence, gambling: it enables a bettor to stake or risk money on the outcome of a contest of chance or a future contingent event not under the bettor's control or influence, with the understanding that they will receive something of value if a certain outcome occurs.' This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers. The 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, has asserted 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. The Commodity Futures Trading Commission Chairman, Mike Selig, has maintained that prediction markets, including sports-related contracts, fall under the agency's exclusive jurisdiction. The CFTC has filed lawsuits against several states to prevent them from taking action against prediction market providers. Kalshi, a major prediction market provider, was not named in the lawsuit and had previously sued 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 stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution.'