The state of New York filed lawsuits against Coinbase and Gemini, asserting that their predictive market offerings, which encompass sports, entertainment, and election-related contracts, are essentially unlicensed gambling products. According to the lawsuits, these platforms have been advertising their predictive markets and acting as bookmakers, which is in contravention of state laws.
The New York Attorney General's office noted that the platforms allow users, referred to as 'bettors,' to place bets, with each contract being akin to a wager. Furthermore, the platforms permit individuals between the ages of 18 and 21 to participate, despite New York's laws prohibiting anyone under 21 from engaging in mobile app gambling.
The lawsuit against Coinbase stated, 'What the respondent offers through its platform is, in essence, gambling: it allows a bettor to stake or risk money on the outcome of a contest of chance or a future event not under the bettor's control, with the understanding that they will receive something of value if a certain outcome occurs.' New York is not the only state to take legal action against predictive market providers; other states, including Nevada and Washington, have also filed lawsuits, arguing that these bets are not federally regulated swaps but rather fall under state gambling laws. This issue is currently before multiple appeals courts and may eventually be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that predictive markets are federally regulated national exchanges and that the company will advocate for federal oversight.
Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that predictive markets, including those related to sports, fall under the agency's exclusive jurisdiction, and the CFTC has taken legal action to block charges against predictive market providers in several states. Kalshi, a major predictive market provider, was not named as a defendant but had previously sued 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 stated that both Gemini and Coinbase's products constitute 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution.'