In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. The lawsuit claims that these platforms have been advertised and operated as bookmakers, with users essentially placing bets on various outcomes. Furthermore, the suit argues that the platforms permit individuals between the ages of 18 and 21 to participate, despite New York's ban on gambling for those under 21 on mobile apps.
The New York Attorney General's office has described the predictive market platforms as facilitating gambling, where users stake money on the outcome of events beyond their control, with the understanding of receiving something of value based on the outcome. This move by New York is part of a larger trend, with states like Nevada and Washington also taking legal action against predictive market providers, contending that sports-related bets are indeed a form of gambling, rather than federally regulated swaps.
The issue is currently being deliberated in 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 stated that predictive markets are federally regulated national exchanges and that the company will advocate for federal oversight. Gemini, on the other hand, has declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that predictive markets, including those related to sports, fall under the agency's exclusive jurisdiction. The CFTC has taken action against several states to prevent them from pursuing charges against predictive market providers. Notably, Kalshi, a major predictive market provider, was not included as a defendant in the lawsuit.
The company had previously taken preemptive action against the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James has condemned both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its guise, is subject to regulation under state laws and the Constitution.