In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been promoting their prediction markets and acting as bookmakers, which is deemed to be in violation of state gambling laws.
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 describes the activities on these platforms as quintessentially gambling, where users stake money on the outcome of events beyond their control, with the understanding that they will receive something of value based on the outcome. This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against prediction market providers.
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 has stated that prediction markets are federally regulated and the company will advocate for federal oversight. Conversely, Gemini has chosen not to comment on the matter.
The Commodity Futures Trading Commission Chairman has expressed the view that prediction markets fall under the agency's exclusive jurisdiction, and the CFTC has taken legal action to block charges against prediction market providers in several states. Meanwhile, Kalshi, a significant prediction market provider, was not named in the lawsuit and is currently awaiting a federal court ruling on whether state gambling laws apply to its platform. New York State Attorney General Letitia James has denounced both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.