On Tuesday, New York filed a lawsuit against Coinbase and Gemini, contending that their predictive market offerings, which encompass sports, entertainment, and election-related contracts, are in contravention of state laws regulating gambling. According to the lawsuit, these offerings are deemed unlicensed gambling products due to the manner in which they were advertised and the role the companies assume as bookmakers on their respective platforms.
The New York Attorney General's office further described the behavior of these predictive market platforms, referring to users as 'bettors' and characterizing each contract as a 'bet.' The lawsuit also highlights that these platforms permit individuals between the ages of 18 and 21 to place bets, despite New York's prohibition on gambling for those under 21 via mobile apps. The lawsuit against Coinbase states, 'What the respondent offers through its platform is quintessentially gambling: it allows a bettor to stake or risk money on the outcome of a contest of chance or a future contingent event not under the bettor's control or influence, with the understanding that they will receive something of value if a certain outcome occurs.' New York is not the first state to take legal action against predictive market providers regarding their sports and entertainment products, as states like Nevada and Washington have also filed similar lawsuits, arguing that at least the sports-related bets constitute gambling rather than federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, stated on X 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 those related to sports, fall under his agency's exclusive jurisdiction, and the CFTC has taken legal action against several states to block charges against predictive market providers. Kalshi, a major predictive market provider, was not named as a defendant and had previously sued 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 both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution.'