In a recent lawsuit, New York has targeted Coinbase and Gemini, asserting that their predictive market offerings, which encompass sports, entertainment, and elections, are in contravention of state gambling laws. The lawsuit posits that these offerings are, in essence, unlicensed gambling products, highlighting the manner in which the companies have advertised their predictive markets and their role as bookmakers. Furthermore, the NYAG's office has characterized the behavior of these platforms, referring to users as 'bettors' and stipulating that 'each contract is a bet.' The lawsuit also contends that the platforms permit individuals between the ages of 18 and 21 to place bets, which is in violation of New York's laws prohibiting anyone under 21 from engaging in mobile app gambling.
The suit against Coinbase succinctly states, '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 first state to take legal action against predictive market providers regarding their sports and entertainment products, as states such as Nevada and Washington have filed similar lawsuits, arguing that at least the sports-related bets are, indeed, bets and not federally regulated swaps. This issue is currently before multiple appeals courts and is likely to be reviewed by the U.S. Supreme Court. In response, Coinbase Chief Legal Officer Paul Grewal has stated that 'prediction markets are federally regulated national exchanges' and that Coinbase will advocate for federal oversight.
A spokesperson for Gemini declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including those related to sports, fall under his agency's 'exclusive jurisdiction.' The CFTC has filed suit against several states to prevent them from bringing charges against prediction market providers. Kalshi, a major prediction 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 has stated that both Gemini and Coinbase's products are 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'