In a recent lawsuit, New York has taken action against Coinbase and Gemini, arguing that their prediction market offerings, which involve sports, entertainment, and elections, are in violation of state laws governing gambling. The lawsuit alleges that these platforms are essentially providing unlicensed gambling products, as they allow users to place bets and act as bookmakers. Furthermore, it is claimed that the platforms permit individuals between the ages of 18 and 21 to participate, despite New York's laws prohibiting those under 21 from engaging in mobile app gambling.
The state's argument is that the prediction markets are, in essence, a form of gambling where users stake money on the outcome of events beyond their control, with the expectation 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 their sports-related products constitute gambling rather than federally regulated swaps.
The issue is currently being deliberated in multiple appeals courts and is likely to be heard by the US 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, on the other hand, has declined to comment. The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that prediction markets, including those related to sports, fall under the exclusive jurisdiction of his agency, and the CFTC has taken legal action to block charges against prediction market providers in several states.
Another major prediction market provider, Kalshi, was not named in the lawsuit but has 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 has stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.