In a recent lawsuit, New York targeted Coinbase and Gemini, asserting that their prediction market products, which encompass sports, entertainment, and election-related contracts, are in fact unlicensed gambling products. The lawsuit highlights how these companies have advertised their prediction markets and acted as bookmakers, further emphasizing the gambling nature of these operations. Furthermore, it notes that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting gambling for those under 21 on mobile apps.
The lawsuit against Coinbase states, 'What the respondent offers through its platform is quintessentially gambling: it allows a bettor to stake or risk money on the outcome of a contest of chance or a 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 first state to take such action, as Nevada, Washington, and several other states have filed similar lawsuits, arguing that these bets are indeed a form of gambling and not federally regulated swaps. This 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 national exchanges and that Coinbase will advocate for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has expressed 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 prediction market providers, further complicating the regulatory landscape.
Kalshi, a major prediction market provider, was not named in the lawsuit but had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from our state laws and Constitution.'