In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been operating as bookmakers, with users effectively placing bets on various outcomes, including sports and entertainment events. The state argues that this activity is a clear breach of state gambling laws, particularly given that individuals between the ages of 18 and 21 are allowed to participate, despite being below the legal gambling age in New York.
The lawsuit claims that the predictive market platforms are, in essence, facilitating gambling by allowing users to stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if their prediction is correct. This legal action is part of a broader trend, with states like Nevada and Washington also taking predictive market providers to court over similar issues. The debate surrounding the nature of these predictive markets - whether they constitute bets or federally regulated swaps - is ongoing and likely to be decided by higher courts, potentially including the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, has asserted that predictive markets fall under federal regulation and has expressed the company's intention to advocate for federal oversight. Gemini, on the other hand, has declined to comment on the matter.
The Commodity Futures Trading Commission (CFTC) has also weighed in, with its Chairman, Mike Selig, arguing that predictive markets, including those related to sports, are under the exclusive jurisdiction of the CFTC. The agency has taken legal action to block charges against predictive market providers in several states. Notably, Kalshi, a major predictive market provider, was not named in the lawsuit.
The company had previously sued 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 characterized the predictive market offerings of both Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.