The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their prediction market offerings, which cover sports, entertainment, and elections, are in violation of state gambling regulations. According to the lawsuit, these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers. The New York Attorney General's office has described the behavior of these platforms, referring to users as 'bettors' and characterizing each contract as a 'bet'.
Furthermore, the lawsuit argues that these platforms allow 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 against Coinbase states, '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 action against prediction market providers, as Nevada, Washington, and several other states have also filed lawsuits, contending that sports-related bets are indeed a form of gambling and not federally regulated swaps. This issue is currently being considered by multiple appeals courts and may eventually be heard by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer Paul Grewal stated that prediction markets are federally regulated national exchanges and that the company 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 the exclusive jurisdiction of his agency. The CFTC has taken legal action against Arizona, Connecticut, and Illinois to prevent them from pursuing charges against prediction market providers. Kalshi, a major prediction market provider, was not named as a defendant in the lawsuit and had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform.
New York State Attorney General Letitia James released a statement, calling the products offered by Gemini and Coinbase 'illegal gambling operations'. She emphasized that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution'.