In a recent lawsuit, New York has taken action against Coinbase and Gemini, arguing that their predictive market contracts, which involve sports, entertainment, and elections, are in violation of state gambling regulations. According to the lawsuit, the predictive market offerings provided by Coinbase and Gemini are essentially unlicensed gambling products, highlighting how these companies have advertised their predictive markets and their role as bookmakers on the platforms. The lawsuit also notes that the platforms allow users between the ages of 18 and 21 to place bets, which is prohibited in New York as the state bars anyone under 21 from participating in mobile app gambling.

The lawsuit describes the behavior of the predictive market platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' New York is not the only state to take action against predictive market providers, as several other states, including Nevada and Washington, have filed similar lawsuits, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps. This issue is currently being reviewed by multiple appeals courts and is likely to be brought before the U.S. Supreme Court. In response to the lawsuit, Coinbase's Chief Legal Officer, Paul Grewal, stated that predictive markets are federally regulated national exchanges and that the company will fight for federal oversight.

A spokesperson for Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that predictive markets, including sports-related contracts, fall under the agency's exclusive jurisdiction. The CFTC has taken action against several states, including Arizona, Connecticut, and Illinois, to prevent them from bringing charges against predictive market providers.

Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit, but had previously taken legal action 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 stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'