In a recent lawsuit, New York has sued major cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been advertising their prediction markets and acting as bookmakers, which New York Attorney General's office claims is equivalent to gambling. The lawsuit highlights that users of these platforms are essentially 'bettors' and that each contract placed on the platform is, in effect, a bet.
Furthermore, the lawsuit argues that these platforms allow individuals between the ages of 18 and 21 to participate, despite New York state law prohibiting anyone under 21 from engaging in mobile app gambling. The case against Coinbase explicitly states that the activities on their platform are 'quintessentially gambling,' 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 lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, asserting that 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 be reviewed by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are subject to federal regulation 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 Chairman Mike Selig arguing that prediction markets, including those related to sports, fall under the CFTC's exclusive jurisdiction. The CFTC has taken 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 its own ongoing case against the New York State Gaming Commission, seeking a ruling that its platform is not subject to state gambling laws.
New York State Attorney General Letitia James has stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and regulations.