The state of New York has filed a lawsuit against both Coinbase and Gemini, asserting that their predictive market offerings, which encompass sports, entertainment, and election-related contracts, are in violation of state laws regulating gambling. The lawsuit alleges that these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers. Furthermore, the lawsuit 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 on mobile apps.
The lawsuit states, 'In essence, what the respondent offers through its platform is quintessentially gambling, allowing a bettor to stake money on the outcome of a chance event not under their control, with the understanding that they will receive something of value if a certain outcome occurs.' This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against predictive market providers, arguing that at least the sports-related bets constitute gambling rather than federally regulated swaps. The 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, has stated that predictive markets are federally regulated national exchanges and that Coinbase will advocate for federal oversight. A spokesperson for Gemini declined to comment. The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that prediction markets, including those related to sports, fall under the exclusive jurisdiction of his agency.
The CFTC has taken legal action against several states to prevent them from charging prediction market providers. New York State Attorney General Letitia James has described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that 'gambling by any other name is still gambling and is subject to our state laws and Constitution.'