In a lawsuit filed on Tuesday, New York alleged that Coinbase and Gemini's prediction market offerings constitute unlicensed gambling products, citing the companies' advertising strategies and their role as bookmakers. According to the lawsuits, the platforms enable users, referred to as 'bettors,' to place bets, with each contract essentially being a wager. Furthermore, the suits pointed out that the platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's prohibition on gambling for those under 21 on mobile apps. The lawsuit against Coinbase stated, 'What the respondent offers through its platform is essentially gambling, as it allows a bettor to stake money on the outcome of a contest of chance or a future event not under their control, with the understanding that they will receive something of value if a certain outcome occurs.' New York is not the only state to take action against prediction market providers, as Nevada, Washington, and other states have also filed similar lawsuits, arguing that sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. Coinbase's Chief Legal Officer, Paul Grewal, responded by stating that prediction markets are federally regulated national exchanges and that the company would fight for federal oversight.
Gemini declined to comment on the matter. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including sports-related contracts, fall under his agency's exclusive jurisdiction. The CFTC has taken action to block charges against prediction market providers in several states and has filed to join another case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named as a defendant and had previously sued 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 both Gemini and Coinbase's products are 'illegal gambling operations,' adding that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution.'