On Tuesday, New York initiated a lawsuit against the cryptocurrency exchanges Coinbase and Gemini, contending that their predictive market offerings constitute unlicensed gambling products. According to the lawsuit, the manner in which these companies advertise their predictive markets and function as bookmakers on their platforms supports this assertion. The office of the New York State Attorney General described the behavior of users on these platforms as that of "bettors," stating that each contract effectively represents a bet.
Furthermore, the lawsuit argues that these platforms permit individuals between the ages of 18 and 21 to place bets, which is in contravention of New York state law that prohibits anyone under the age of 21 from participating in mobile app gambling. The lawsuit against Coinbase characterizes the company's platform as quintessentially a gambling operation, where users stake money on the outcome of events outside of their control with the understanding that they will receive something of value if a certain outcome occurs.
New York is not the only state to have taken legal action against predictive market providers over their sports and entertainment products, as Nevada, Washington, and several other states have filed similar lawsuits. This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response to the lawsuit, Coinbase's Chief Legal Officer, Paul Grewal, stated that predictive markets are federally regulated national exchanges and that the company would advocate for federal oversight.
Gemini declined to comment on the matter. The Chairman of the Commodity Futures Trading Commission, Mike Selig, has argued that predictive markets, including those related to sports, fall under the exclusive jurisdiction of his agency. The CFTC has taken legal action against several states to prevent them from pursuing charges against predictive market providers. Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit and had previously taken preemptive legal action against the New York State Gaming Commission.
New York State Attorney General Letitia James characterized the products offered by Gemini and Coinbase as "illegal gambling operations," stating that gambling by any other name is still subject to regulation under state laws and the Constitution.