In a recent lawsuit, New York has taken action against Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuits highlight how these companies have advertised their prediction markets and acted as bookmakers, with users essentially placing bets. Furthermore, the platforms have been accused of allowing individuals between the ages of 18 and 21 to participate, which contradicts New York's laws prohibiting gambling on mobile apps for those under 21. The New York Attorney General's office has described the behavior of these platforms as quintessentially gambling, where users stake money on the outcome of events beyond their control.
This lawsuit is part of a broader trend, with states like Nevada and Washington also taking similar action, arguing that such bets are not federally regulated swaps but rather illegal gambling. The issue is currently before multiple appeals courts and is likely to be reviewed by the U.S.
Supreme Court. In response, Coinbase has stated that prediction markets are federally regulated and will fight for federal oversight, while Gemini has declined to comment. The Commodity Futures Trading Commission has also weighed in, arguing that these markets fall under its jurisdiction.
Another 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 emphasized that regardless of terminology, gambling operations are subject to state laws and regulations.