In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The state's argument hinges on the companies' advertising strategies and their role as bookmakers on the platforms.
Furthermore, the lawsuit highlights the platforms' allowance of bets from individuals between 18 and 21 years old, which contradicts New York's law prohibiting gambling on mobile apps for those under 21. The lawsuit asserts that the prediction market platforms are essentially gambling operations, where users stake money on outcomes beyond their control. This development is part of a broader trend, with multiple states, including Nevada and Washington, taking similar action against prediction market providers. The issue is currently being deliberated in various appeals courts and is likely to be heard by the US Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated and subject to national exchange oversight, with the company prepared to defend this position. Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that prediction markets fall under the agency's exclusive jurisdiction. The CFTC has taken legal action against several states to prevent them from pursuing charges against prediction market providers.
Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit and is currently seeking a federal court ruling that its platform is exempt from state gambling laws. New York State Attorney General Letitia James has characterized the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to state laws and regulations.