In a lawsuit filed on Tuesday, New York targeted Coinbase and Gemini, asserting that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been advertising their prediction markets and acting as bookmakers, which is deemed a clear violation of state gambling laws.
The lawsuit highlights that users are essentially 'bettors' and each contract is considered a bet, with the platforms allowing individuals between the ages of 18 and 21 to place bets, despite New York's ban on gambling for those under 21 on mobile apps. The NYAG's office elaborated, stating, 'As described, what the respondent offers through its platform is essentially gambling, where a bettor risks money on the outcome of an event not under their control, with the understanding of receiving something of value based on the outcome.' This move by New York is the latest in a series of lawsuits by states, including Nevada and Washington, against prediction market providers over their sports and entertainment products, arguing that these bets are not federally regulated swaps but rather illegal gambling activities. The issue is currently before multiple appeals courts and is expected to reach the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that prediction markets are federally regulated and the company will advocate for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that prediction markets fall under the agency's exclusive jurisdiction, and the CFTC has taken steps to block charges against prediction market providers in several states. Another major prediction market provider, Kalshi, was not named in the lawsuit but had previously taken preemptive action against 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 operate 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is subject to our state laws and Constitution.'