In a recent lawsuit, New York has taken action against Coinbase and Gemini, asserting that their prediction market offerings, which encompass sports, entertainment, and elections, are in violation of state laws pertaining to gambling. The lawsuit alleges that these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers.
Furthermore, the lawsuit highlights that the platforms permit individuals between the ages of 18 and 21 to place bets, which is in contravention of New York's laws that prohibit anyone under the age of 21 from engaging in mobile app gambling. The lawsuit characterizes the activities on these platforms as 'quintessentially gambling,' where users stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if certain outcomes occur. This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers, arguing that their sports-related products constitute betting activities rather than federally regulated swaps.
The issue is currently being deliberated in multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets fall under federal regulation and that the company will advocate for federal oversight.
Gemini, on the other hand, has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that prediction markets, including those related to sports, fall within the exclusive jurisdiction of his agency.
Meanwhile, Kalshi, a significant prediction market provider, was not named in the lawsuit, having previously taken preemptive legal action against the New York State Gaming Commission. New York State Attorney General Letitia James has described 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.