On Tuesday, the state of New York filed lawsuits against cryptocurrency exchanges Coinbase and Gemini, contending that their prediction market offerings constitute unlicensed gambling products. According to the lawsuits, the manner in which these companies advertise their prediction markets and act as bookmakers on their platforms supports this claim.
Furthermore, the New York Attorney General's office highlighted that the platforms refer to users as 'bettors' and describe each contract as a 'bet.' The lawsuits also pointed out that individuals between the ages of 18 and 21 are allowed to place bets on these platforms, which contradicts New York's law that prohibits anyone under 21 from participating in mobile app gambling. The suit against Coinbase emphasized that the activities on its platform are essentially gambling, as they involve staking money on the outcome of events beyond the bettor's control, with the understanding that the bettor will receive something of value if certain outcomes occur. 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 at least sports-related bets should be classified as gambling rather than federally regulated swaps. This issue is currently being deliberated in multiple appeals courts and is likely to be reviewed by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that prediction markets are federally regulated and that Coinbase would advocate for federal oversight. Gemini declined to comment on the matter.
Commodity Futures Trading Commission Chairman Mike Selig has asserted that prediction 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 charging prediction market providers, demonstrating the complexity and multifaceted nature of this regulatory issue.
New York State Attorney General Letitia James described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that regardless of terminology, gambling is subject to regulation under state laws and the Constitution.