In a recent development, New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been advertising their prediction markets and acting as bookmakers, which is deemed to be in violation of state laws.

The lawsuit also highlights the fact that users of these platforms are essentially 'bettors' and that each contract can be considered a bet. Furthermore, the platforms have been accused of allowing individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21.

The lawsuit states, 'What Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' This lawsuit is not an isolated incident, as other states such as Nevada and Washington have also taken similar action against prediction market providers. The issue is currently being deliberated in multiple appeals courts and may eventually be heard by the U.S.

Supreme Court. In response to the lawsuit, Coinbase's Chief Legal Officer Paul Grewal has stated that prediction markets are federally regulated national exchanges and that the company will advocate for federal oversight. On the other hand, Gemini has chosen not to comment on the matter.

The Commodity Futures Trading Commission Chairman, Mike Selig, has expressed his opinion that prediction markets fall under the exclusive jurisdiction of his agency. The CFTC has taken action to block charges against prediction market providers in several states and has filed to join another case in Nevada to defend these providers.

Kalshi, a major prediction market provider, was not named as a defendant in the lawsuit. However, the company 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 has released a statement referring to the products offered by Gemini and Coinbase as 'illegal gambling operations.' She emphasized that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'