In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit asserts that these platforms have been advertised and operated as bookmakers, with users essentially betting on various outcomes.
Furthermore, it is claimed that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's laws prohibiting gambling on mobile apps for those under 21. The lawsuit describes the prediction market platforms as facilitating bets on the outcome of events beyond the bettor's control, which is quintessentially gambling.
This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers, arguing that such activities are indeed gambling and not federally regulated swaps. The issue is currently pending before multiple appeals courts and may eventually be heard by the U.S. Supreme Court.
In response, Coinbase has stated its intention to fight for federal oversight, arguing that prediction markets are federally regulated national exchanges. Gemini, on the other hand, has declined to comment. The Commodity Futures Trading Commission has also weighed in, claiming exclusive jurisdiction over prediction markets and seeking to block charges against prediction market providers in several states. Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit but has its own ongoing case regarding the applicability of state gambling laws to its platform.
New York State Attorney General Letitia James has labeled the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to state laws and regulations.