In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products, which cover areas such as sports, entertainment, and elections, are essentially unlicensed gambling operations. The lawsuits highlight how these platforms advertise and function, likening user activities to betting and the companies to bookmakers. A key point of contention is the age range of users, as New York law prohibits gambling via mobile apps for those under 21, yet these platforms allegedly allow such activities.
The state's argument is that these prediction markets are, by definition, gambling, as they involve staking money on the outcome of events beyond the bettor's control with the expectation of receiving something of value. This lawsuit is part of a broader trend, with other states like Nevada and Washington also taking legal action against prediction market providers. The issue is complex, with potential federal implications, and may eventually be decided by the U.S. Supreme Court.
Coinbase has stated its intention to fight for federal oversight, arguing that prediction markets are federally regulated national exchanges. Gemini, on the other hand, has declined to comment. The Commodity Futures Trading Commission (CFTC) has also weighed in, asserting its jurisdiction over prediction markets, including those related to sports. Another major prediction market provider, Kalshi, was not named in the lawsuit but has its own ongoing legal case regarding the applicability of state gambling laws to its platform.
New York State Attorney General Letitia James has reiterated the state's stance, emphasizing that gambling, regardless of its form, is subject to state laws and regulations.