In a recent lawsuit filed on Tuesday, New York targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have promoted their prediction markets and acted as bookmakers, effectively allowing users to place bets. Furthermore, it is claimed that the platforms permit individuals between the ages of 18 and 21 to engage in betting activities, which is prohibited in New York for those under 21 using mobile apps. The New York Attorney General's office has described the behavior of these platforms as quintessentially gambling, where users stake money on the outcome of events beyond their control.
This lawsuit is the latest in a series of actions taken by states, including Nevada and Washington, which argue that such bets are indeed a form of gambling and not federally regulated swaps. The issue is currently being deliberated in 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 federally regulated and the company will advocate for federal oversight. Gemini has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, asserting that prediction markets fall under the exclusive jurisdiction of his agency.
Another major prediction market provider, Kalshi, was not named in the lawsuit but has 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 has characterized the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.