In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products, which encompass sports, entertainment, and election-related contracts, are in violation of state gambling laws. The lawsuit claims that these offerings are essentially unlicensed gambling products, citing the companies' advertising strategies and their role as bookmakers. It also highlights that the platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law barring individuals under 21 from participating in mobile app gambling.
The lawsuit describes the behavior of these platforms, referring to users as 'bettors' and characterizing each contract as a 'bet.' This action is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that such bets are not federally regulated swaps but rather gamble. The issue is currently pending before multiple appeals courts and is likely to be reviewed by 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 declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that prediction markets fall under the agency's jurisdiction, leading to the CFTC's involvement in defending prediction market providers against state charges. Notably, Kalshi, a significant prediction market provider, was not named in the lawsuit and had previously taken preemptive legal action against the New York State Gaming Commission.
New York State Attorney General Letitia James has condemned the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, by any name, remains subject to state laws and the Constitution.