In a recent lawsuit, New York targeted Coinbase and Gemini, alleging that their prediction market products, which involve sports, entertainment, and election outcomes, are essentially unlicensed gambling products. According to the lawsuit, these platforms have been advertising their services and acting as bookmakers, which is against state laws. The lawsuit also highlights that these platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's law prohibiting anyone under 21 from participating in mobile app gambling. The New York Attorney General's office has described the behavior of these platforms as facilitating betting, with users being termed as 'bettors' and each contract being considered a 'bet.' This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related products constitute gambling rather than federally regulated swaps.
The matter is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are under federal regulation and the company will advocate for federal oversight. Gemini, on the other hand, has declined to comment.
The Commodity Futures Trading Commission Chairman, Mike Selig, has supported the stance that prediction markets, including those related to sports, fall under the agency's jurisdiction. Kalshi, a significant prediction market provider, was not named in the lawsuit but has previously taken legal action against 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 reiterated that these products are 'illegal gambling operations' and emphasized that gambling, regardless of its form, is subject to state laws and the Constitution.