In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have advertised their predictive markets and their role as bookmakers, effectively allowing users to place bets.
Furthermore, the lawsuit points out that these platforms permit individuals between the ages of 18 and 21 to participate, despite New York's ban on gambling for those under 21 on mobile apps. The lawsuit describes the predictive market platforms as facilitating bets, with users being referred to as "bettors" and each contract being deemed a bet.
This stance is in line with other states, such as Nevada and Washington, which have also filed lawsuits against predictive market providers, arguing that sports-related bets are indeed a form of gambling and not federally regulated swaps. The issue is currently being deliberated in multiple appeals courts and is likely to be reviewed by the U.S. Supreme Court.
In response to the lawsuit, Coinbase's Chief Legal Officer, Paul Grewal, stated that predictive markets are federally regulated national exchanges and that the company would advocate for federal oversight. Gemini, on the other hand, declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has asserted that predictive markets, including those related to sports, fall under the agency's jurisdiction. The CFTC has taken legal action against several states to prevent them from charging predictive market providers and has filed to join another case in Nevada to defend these providers.
Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit. However, the company had previously filed a lawsuit against the New York State Gaming Commission, seeking a ruling that state gambling laws do not apply to its platform. This case is still pending in the Southern District of New York courthouse. New York State Attorney General Letitia James released a statement, referring to both Gemini and Coinbase's products as "illegal gambling operations." She emphasized that gambling, regardless of its name, is still subject to regulation under state laws and the Constitution.