In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products are essentially unlicensed gambling offerings. According to the lawsuit, these platforms have been advertised and operated as bookmakers, with users being referred to as 'bettors' and each contract being deemed a 'bet'. Furthermore, the suits claim that these platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps.
The lawsuit against Coinbase asserts that the platform's offerings are 'quintessentially gambling', allowing users to stake money on the outcome of events beyond their control. This development is the latest in a series of similar lawsuits filed by states such as Nevada and Washington, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps. The 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 has stated that prediction markets are federally regulated national exchanges and the company will argue for federal oversight. Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission Chairman has also weighed in, arguing that prediction markets fall under the agency's exclusive jurisdiction and has taken 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 the products offered by Gemini and Coinbase are 'illegal gambling operations', emphasizing that gambling by any other name remains subject to regulation under state laws and the Constitution.