In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit claims that these platforms have been operating in violation of state laws, allowing users to place bets on sports, entertainment, and election outcomes. According to the NYAG's office, the platforms' prediction markets are essentially gambling operations, with users acting as 'bettors' and each contract being a bet. The lawsuit also highlights that the platforms permit individuals between the ages of 18 and 21 to place bets, despite New York's ban on mobile app gambling for those under 21.
The case against Coinbase states that the platform's offerings are 'quintessentially gambling,' allowing users to stake money on the outcome of events beyond their control. This lawsuit is part of a broader trend, with other states such as Nevada and Washington having filed similar suits against prediction market providers. The issue is expected to be resolved in the appeals courts and may eventually reach the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer Paul Grewal has asserted 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 has argued that prediction markets fall under his agency's exclusive jurisdiction, and the CFTC has taken action to block charges against prediction market providers in other states.
Another major prediction market provider, Kalshi, was not named in the lawsuit but has preemptively 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 by any other name is still subject to regulation under state laws and the Constitution.