In a lawsuit filed on Tuesday, New York targeted Coinbase and Gemini, contending that their predictive market products, which encompass sports, entertainment, and elections, are in breach of state gambling regulations. The lawsuits assert that these platforms are essentially unlicensed gambling products, highlighting how the companies promote their predictive markets and function as bookmakers. The New York Attorney General's office described the platforms' operations, referring to users as 'bettors' and stating that 'each contract is a bet.' The suits also pointed out that the platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting 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 only state to take legal action against predictive market providers over their sports and entertainment offerings, as states like Nevada and Washington have also 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 heard by the U.S. Supreme Court. In response, Coinbase Chief Legal Officer Paul Grewal stated that 'prediction markets are federally regulated national exchanges' and that Coinbase would advocate for federal oversight.
A Gemini spokesperson 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 action against several states to prevent them from pursuing charges against predictive market providers. Kalshi, a major predictive market provider, was not named as a defendant and had previously sued the New York State Gaming Commission.
New York State Attorney General Letitia James described both Gemini and Coinbase's products as 'illegal gambling operations,' stating, 'Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'