On Tuesday, New York filed lawsuits against Coinbase and Gemini, arguing that their prediction market products, which cover sports, entertainment, and elections, are in breach of state laws regulating gambling. The lawsuits contend that these products are essentially unlicensed gambling offerings, citing how the companies promote their prediction markets and function as bookmakers. The New York Attorney General's office described the behavior of these platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' Additionally, the suits argue that the platforms enable 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 states, 'As described above, what Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' New York is not the only state to take legal action against providers of prediction markets for their sports and entertainment products, as Nevada, Washington, and other states have filed similar lawsuits, arguing that at least sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently before multiple appeals courts and may ultimately be decided by the U.S. Supreme Court.
In response, Coinbase Chief Legal Officer Paul Grewal stated that 'prediction markets are federally regulated national exchanges' and that Coinbase would advocate for federal oversight. A spokesperson for Gemini declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including sports-related contracts, fall under his agency's exclusive jurisdiction. The CFTC has taken legal action against several states to prevent them from charging prediction market providers.
Kalshi, a major prediction market provider, was not named as a defendant and had previously sued the New York State Gaming Commission. New York State Attorney General Letitia James stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' adding that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'