On Tuesday, New York filed lawsuits against Coinbase and Gemini, contending that their prediction market offerings constitute unlicensed gambling products. According to the lawsuits, these platforms allow users to engage in betting, with the companies acting as bookmakers and promoting their prediction markets in a manner that suggests gambling. The New York Attorney General's office emphasized that the platforms permit individuals between the ages of 18 and 21 to place bets, which contravenes New York's law prohibiting anyone under 21 from participating in mobile app gambling.
The suits describe the behavior of the prediction market platforms, referring to users as 'bettors' and each contract as 'a bet.' The state argues that the essence of the platforms' offerings is gambling, as they enable users to stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if a specific outcome occurs. New York is not the only state to take action against prediction market providers; other states, including Nevada and Washington, have filed similar lawsuits. The issue is currently before multiple appeals courts and may ultimately be decided by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that prediction markets are federally regulated national exchanges and that Coinbase 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 exclusive jurisdiction.
The CFTC has taken legal action against several states to prevent them from charging prediction market providers, and it has also intervened in a case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named as a defendant, having previously sued the New York State Gaming Commission to establish that state gambling laws do not apply to its platform. New York State Attorney General Letitia James stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to regulation under state laws and the Constitution.