In a recent lawsuit, New York targeted Coinbase and Gemini, claiming their prediction market products, which involve sports, entertainment, and elections, are essentially unlicensed gambling products. The state's argument is based on how these companies advertise their prediction markets and their role as bookmakers, as well as the platforms' allowance of bets from individuals between 18 and 21 years old, which contradicts New York's law barring those under 21 from participating in mobile gambling. The lawsuit describes the behavior of these platforms as gambling, with users being referred to as "bettors" and each contract being considered a bet.
This move by New York is part of a larger trend, as states like Nevada and Washington have also taken legal action against prediction market providers, arguing that their sports-related bets are indeed a form of gambling and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to reach the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that prediction markets are federally regulated and the company will fight for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets fall under its jurisdiction. This legal landscape continues to evolve, with other prediction market providers, like Kalshi, taking preemptive legal action against state gaming commissions to assert their operations are not subject to state gambling laws.