In a recent lawsuit, New York targeted Coinbase and Gemini, alleging that their prediction market platforms, which cover sports, entertainment, and elections, are in violation of state gambling laws. The lawsuit contends that these platforms are essentially unlicensed gambling products, highlighting how they are advertised and the role of the companies as bookmakers. Furthermore, it notes that the platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law that prohibits anyone under 21 from gambling on mobile apps. The state's argument is that these platforms facilitate gambling by allowing users to stake money on the outcome of events beyond their control, with the understanding that they will receive something of value based on the outcome.
This lawsuit follows similar actions by other states, including Nevada and Washington, which have also argued that such bets are indeed a form of gambling and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to be taken up by the U.S. Supreme Court. In response, Coinbase has stated its intention to fight for federal oversight, arguing that prediction markets are federally regulated national exchanges.
Gemini declined to comment on the matter. The Commodity Futures Trading Commission has also weighed in, asserting its exclusive jurisdiction over prediction markets, including those related to sports. The CFTC has taken legal action against several states to prevent them 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 ongoing legal case 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 stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.