In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market services, which cover areas such as sports, entertainment, and elections, are essentially unlicensed gambling products. According to the lawsuit, the way these companies promote their predictive markets and act as bookmakers on their platforms further supports this claim. The New York Attorney General's office has described the behavior of these platforms in detail, referring to users as 'bettors' and emphasizing that each contract essentially constitutes a bet.
Furthermore, the lawsuit argues that these platforms allow individuals between the ages of 18 and 21 to place bets, which contravenes New York's laws that prohibit anyone under 21 from engaging in mobile app gambling. The lawsuit against Coinbase states, 'As described, the respondent's platform offers quintessential gambling: allowing a bettor to stake or risk money on the outcome of a chance event or future event not under the bettor's 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 such action, as other states like Nevada and Washington have also filed lawsuits against predictive market providers, arguing that at least sports-related bets should be classified as bets rather than federally regulated swaps. This issue is currently being deliberated by multiple appeals courts and is likely to be taken up by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated on social media that predictive markets are federally regulated national exchanges and that Coinbase will advocate for federal oversight.
Gemini, on the other hand, declined to comment on the matter. The Chairman of the Commodity Futures Trading Commission, Mike Selig, has asserted 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 and has also sought to join another case in Nevada to defend these providers.
Kalshi, a major predictive market provider, was not named in the lawsuit 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 released a statement describing both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution.'