On Tuesday, New York filed lawsuits against Coinbase and Gemini, contending that their predictive market offerings constitute unlicensed gambling products. According to the lawsuits, the manner in which these companies advertise their predictive markets and act as bookmakers on their platforms supports this claim.

The New York Attorney General's office described the behavior of these predictive market platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' The lawsuits also point out that these platforms allow individuals between the ages of 18 and 21 to place bets, which is in contravention of New York's laws prohibiting anyone under 21 from participating in mobile app gambling. The suit against Coinbase asserts, 'As described above, what Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' New York is not the first state to take legal action against predictive market providers over their sports and entertainment products, as states like Nevada and Washington have also filed similar lawsuits. This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court.

In response, Coinbase's Chief Legal Officer Paul Grewal stated that predictive markets are federally regulated national exchanges and that Coinbase will advocate for federal oversight. A spokesperson for Gemini declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that predictive markets fall under his agency's exclusive jurisdiction, and the CFTC has taken legal action to block charges against predictive market providers in several states. Kalshi, a major predictive market provider, was not named as a defendant and had previously sued the New York State Gaming Commission.

New York State Attorney General Letitia James described the products offered by Gemini and Coinbase as 'illegal gambling operations,' stating, 'Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'