In a recent lawsuit, New York has targeted Coinbase and Gemini, claiming that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how the companies have promoted their prediction markets and acted as bookmakers, which, according to the NYAG's office, is equivalent to gambling. It also notes that users are referred to as 'bettors' and that each contract is essentially a bet.

Furthermore, the platforms allegedly 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 states, 'What the respondent offers through its platform is, in essence, gambling: it enables a bettor to stake or risk money on the outcome of a chance event 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 only state to take such action, as other states like Nevada and Washington have also filed similar lawsuits, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to be heard by 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 the company will fight for federal oversight. Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that prediction markets fall under the agency's exclusive jurisdiction.

Kalshi, a major prediction market provider, was not named as a defendant but had 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 described both Gemini and Coinbase's products as 'illegal gambling operations,' stating that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'