In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have advertised their prediction markets and acted as bookmakers, thereby violating state laws. The New York Attorney General's office has pointed out that the platforms allow users between 18 and 21 to place bets, which is prohibited in New York for those under 21.
The state argues that the platforms' operations are essentially gambling, where users stake money on the outcome of events beyond their control, with the understanding of receiving something of value based on the outcome. This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related products are indeed gambling and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to reach the U.S. Supreme Court.
In response, Coinbase has stated that prediction markets are federally regulated and will fight for federal oversight, while Gemini declined to comment. The Commodity Futures Trading Commission Chairman has also weighed in, arguing that prediction markets fall under his agency's jurisdiction, and has taken legal action to defend prediction market providers. Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit but has a pending case in the Southern District of New York, seeking a ruling that state gambling laws do not apply to its platform.
New York State Attorney General Letitia James has stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to regulation under state laws and the Constitution.