In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. The lawsuit highlights how these platforms advertise their predictive markets and function as bookmakers, thereby positioning users as 'bettors' where 'each contract is a bet.' Furthermore, the lawsuit criticizes the platforms for allowing individuals 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 case against Coinbase emphasizes that the predictive market offerings are essentially gambling, as they involve staking money on the outcome of events beyond the bettor's control, with the understanding that a certain outcome will yield something of value. This legal action is part of a broader trend, with states like Nevada and Washington also taking similar action against predictive market providers, arguing that such bets are indeed gambling and not federally regulated swaps.
The issue is currently before multiple appeals courts and is likely headed for the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that predictive markets are federally regulated national exchanges and that Coinbase 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, including those related to sports, fall under the exclusive jurisdiction of his agency. The CFTC has taken legal action against several states to prevent them from charging predictive market providers, further complicating the regulatory landscape.
Kalshi, a major prediction market provider, was not named in the lawsuit but has its own ongoing legal battle with the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform. 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.