In a recent development, New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which include contracts related to sports, entertainment, and elections, are in violation of state gambling laws. The lawsuit claims that these offerings are essentially unlicensed gambling products, citing how the companies have advertised these markets and their role as bookmakers. Furthermore, the lawsuit highlights that the platforms allow users between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from gambling on mobile apps. The state's argument is that these prediction markets constitute 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 other states like Nevada and Washington also taking legal action against prediction market providers, arguing that at least sports-related bets should be classified as gambling rather than federally regulated swaps. The issue is currently before multiple appeals courts and is expected to reach the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are under federal regulation and the company will advocate for federal oversight.
Gemini has declined to comment on the matter. The Commodity Futures Trading Commission (CFTC) Chairman, Mike Selig, has also weighed in, arguing that prediction markets fall under the CFTC's jurisdiction. Another major prediction market provider, Kalshi, was not named in the lawsuit but has its own ongoing legal case, seeking a federal court ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James has stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and regulations.