New York Takes Legal Action Against Coinbase and Gemini Over Prediction Market Offerings

In a recent development, New York has filed lawsuits against both Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuits point to the manner in which these companies have advertised their prediction markets and their role as bookmakers, describing user interactions as betting activities.

Furthermore, the suits highlight the platforms' allowance of bets from individuals between the ages of 18 and 21, which contradicts New York's laws prohibiting gambling on mobile apps for those under 21. The state's argument is that these prediction markets are essentially gambling operations, where users stake money on the outcome of events beyond their control, with the understanding of receiving something of value based on the outcome.

This issue is part of a broader legal landscape, with other states like Nevada and Washington having filed similar lawsuits, arguing that such bets are not federally regulated swaps but rather fall under state gambling laws. 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 federally regulated and the company will advocate for federal oversight. Gemini has declined to comment on the matter. The Commodity Futures Trading Commission (CFTC) has also weighed in, with its Chairman arguing that prediction markets, including those related to sports, fall under the agency's exclusive jurisdiction. 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 lawsuits and had previously taken preemptive legal action against the New York State Gaming Commission. New York State Attorney General Letitia James has characterized the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and regulations.