In a recent lawsuit, New York has taken action against Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been advertising their prediction markets and acting as bookmakers, which is deemed to be in violation of state laws.
The lawsuit also highlights the platforms' allowance of bets from individuals between the ages of 18 and 21, despite New York's ban on gambling for those under 21 on mobile apps. The NYAG's office has described the behavior of these prediction market platforms as essentially gambling, where users stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if their prediction is correct. This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers over their sports and entertainment products.
The issue is currently before multiple appeals courts and may eventually be heard by the U.S. Supreme Court.
In response to the lawsuit, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated national exchanges and that the company will fight for federal oversight. Gemini, on the other hand, has declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that prediction markets fall under his agency's exclusive jurisdiction.
The CFTC has taken action to block charges against prediction market providers in several states and has filed to join a case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named as a defendant in the lawsuit. However, the company 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 has stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is still subject to regulation under state laws and the Constitution.