In a recent lawsuit, New York has taken action against Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit claims that the way these platforms advertise and operate their prediction markets, including their role as bookmakers, violates state laws.
Furthermore, it's argued that these platforms allow individuals between the ages of 18 and 21 to participate, which contradicts New York's regulations that prohibit anyone under 21 from engaging in mobile app gambling. The lawsuit describes the activities on these platforms as 'quintessentially gambling,' where users stake money on outcomes beyond their control, with the anticipation of receiving something of value based on the outcome. This lawsuit is part of a larger trend, with states like Nevada and Washington also taking legal action against prediction market providers, disputing the notion that their sports-related bets are federally regulated swaps rather than bets.
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 asserted that prediction markets are under federal regulation and the company will advocate for federal oversight. Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has expressed the view that prediction markets, including those related to sports, fall under the agency's jurisdiction. The CFTC has taken legal steps to prevent states like Arizona, Connecticut, and Illinois from pursuing charges against prediction market providers. Another significant player, Kalshi, was not named in the lawsuit but has previously taken legal action against the New York State Gaming Commission, seeking a ruling that its platform is not subject to state gambling laws.
New York State Attorney General Letitia James has stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that regardless of the terminology used, gambling is still subject to regulation under state laws and the Constitution.