On Tuesday, New York filed a lawsuit against Coinbase and Gemini, joining the growing list of states arguing that predictive market contracts involving sports, entertainment, and elections are in breach of state gambling laws. The lawsuit asserts that the predictive market offerings provided by Coinbase and Gemini are essentially unlicensed gambling products, highlighting how these companies have advertised their predictive markets and their role as bookmakers on the platforms. The New York Attorney General's office described the behavior of the predictive market platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' The lawsuit also contends that the platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York as the state bars anyone under 21 from gambling on mobile apps. The suit against Coinbase stated, 'As described above, 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.' New York is not the only state to take legal action against predictive market providers over their sports and entertainment products, as states like Nevada and Washington have also filed similar lawsuits, arguing that at least the sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response, Coinbase Chief Legal Officer Paul Grewal stated that 'prediction markets are federally regulated national exchanges' and that Coinbase would fight for federal oversight.
A spokesperson for Gemini declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including sports-related contracts, fall under his agency's exclusive jurisdiction. The CFTC has filed lawsuits against Arizona, Connecticut, and Illinois to prevent them from bringing charges against predictive market providers. Kalshi, a major predictive market provider, was not named as a defendant and had previously sued 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 stated that both Gemini and Coinbase's products were 'illegal gambling operations,' adding that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'