In a recent development, New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which involve sports, entertainment, and elections, are in violation of state laws regulating gambling. The lawsuit contends that these platforms are essentially providing unlicensed gambling products, as evidenced by their advertising strategies and the role they play as bookmakers. Furthermore, the lawsuit highlights that these platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps.
The case against Coinbase states, "The respondent's platform is fundamentally a form of gambling, where a bettor risks money on the outcome of an event beyond their control, with the understanding that they will receive something of value if the outcome is favorable." This lawsuit is part of a broader trend, with other states such as Nevada and Washington also taking legal action against prediction market providers. The issue is currently being deliberated in 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 federally regulated and the company will advocate for federal oversight. Gemini has 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, and the CFTC has taken legal action to block charges against prediction market providers in several states. Another major prediction market provider, Kalshi, was not named in the lawsuit but has previously sued 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 stated that the products offered by Gemini and Coinbase constitute "illegal gambling operations," emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.