The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their predictive market products, which involve sports, entertainment, and elections, are in breach of state gambling regulations. According to the lawsuit, the predictive market offerings provided by Coinbase and Gemini are essentially unlicensed gambling products, citing the companies' advertising strategies and their role as bookmakers on the platforms. The New York Attorney General's office described the behavior of the predictive market platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' The lawsuit also argued that the platforms enable individuals between the ages of 18 and 21 to place bets, which is prohibited in New York as the state bars anyone under 21 from participating in mobile app gambling. The lawsuit stated, '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 action against predictive market providers, as other states such as Nevada and Washington have also filed lawsuits, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps.
This issue is currently being considered by multiple appeals courts and is likely to be reviewed by the U.S. Supreme Court. In response, Coinbase Chief Legal Officer Paul Grewal stated that predictive markets are federally regulated national exchanges and that Coinbase would advocate for federal oversight.
A Gemini spokesperson declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that predictive markets, including sports-related contracts, fall under the exclusive jurisdiction of his agency.
The CFTC has filed lawsuits against Arizona, Connecticut, and Illinois to prevent them from taking action against predictive market providers and has joined another case in Nevada to defend these providers. Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit. The company had previously filed a lawsuit against 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 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.'