The state of New York has filed lawsuits against Coinbase and Gemini, alleging that their predictive market offerings, which involve sports, entertainment, and elections, are essentially unlicensed gambling products. According to the lawsuits, the way these companies advertise their predictive markets and operate as bookmakers on their platforms suggests they are facilitating gambling. The New York Attorney General's office noted that users of these platforms are essentially 'bettors' and that each contract can be considered a bet.
Furthermore, the platforms allow individuals between the ages of 18 and 21 to place bets, which is against New York's laws that prohibit anyone under 21 from participating in mobile app gambling. The lawsuit against Coinbase stated, '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 such action against predictive market providers. Other states, including Nevada and Washington, have filed similar lawsuits, arguing that at least sports-related bets should be considered gambling rather than federally regulated swaps.
This issue is currently being addressed by multiple appeals courts and is likely to be taken up by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, posted on X (formerly Twitter) that 'prediction markets are federally regulated national exchanges' and that Coinbase would 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 taken legal action against several states to prevent them from charging prediction market providers and has filed to join another case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named in the lawsuit. However, the company had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform.
This case is ongoing in the Southern District of New York courthouse. New York State Attorney General Letitia James released a statement calling both Gemini and Coinbase's products 'illegal gambling operations.' She emphasized, 'Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'