In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products, which involve sports, entertainment, and election outcomes, are essentially unlicensed gambling products. The lawsuit asserts that the way these companies advertise and operate their prediction markets, including their role as bookmakers, classifies them as gambling operations.
Furthermore, the suit points out that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from participating in mobile app gambling. The state's argument is that these prediction market contracts are, in essence, bets where individuals stake money on the outcome of events beyond their control, with the understanding of receiving something of value based on the outcome. This legal challenge is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps.
The issue is currently before multiple appeals courts and is likely to reach the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated and that the company will advocate for federal oversight.
Gemini has declined to comment on the matter. The Commodity Futures Trading Commission (CFTC) has also weighed in, with its Chairman, Mike Selig, arguing that prediction markets fall under the agency's jurisdiction. The CFTC has taken legal action to block several states from charging prediction market providers, further complicating the legal landscape. Another major prediction market provider, Kalshi, was not named in the lawsuit but has its own legal challenge ongoing, seeking a federal court ruling that its platform is not subject to state gambling laws.
New York State Attorney General Letitia James has described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that regardless of terminology, these activities are subject to state laws and regulations.