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 asserts that these platforms have been advertising and operating as bookmakers, allowing users to place bets on outcomes such as sports and entertainment events, which is deemed a violation of state gambling laws.
Furthermore, it is claimed that these platforms permit individuals between the ages of 18 and 21 to engage in betting activities, despite New York's regulations prohibiting anyone under 21 from participating in mobile app gambling. The New York Attorney General's office has described the behavior of these prediction market platforms as essentially gambling, where users stake money on the outcome of events beyond their control. This lawsuit is part of a broader trend, with other states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related products are indeed forms of betting and not federally regulated swaps. The issue is currently pending before multiple appeals courts and is likely to be heard by the U.S.
Supreme Court. In response, Coinbase has stated its intention to fight for federal oversight, citing that prediction markets are federally regulated national exchanges. Meanwhile, Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets fall under its exclusive jurisdiction and filing lawsuits to block charges against prediction market providers in several states. Another major 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 has condemned the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.