In a recent lawsuit, New York has taken action against Coinbase and Gemini, alleging that their prediction market offerings, which involve sports, entertainment, and elections, are in violation of state gambling laws. The lawsuit claims that these offerings are essentially unlicensed gambling products, pointing to the companies' advertising strategies and their role as bookmakers on the platforms. It also highlights that the platforms allow users between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps.
The NYAG's office describes the behavior of these platforms as gambling, with users being referred to as 'bettors' and each contract being considered a 'bet'. This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that their sports-related products constitute gambling and not federally regulated swaps.
The issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court.
Coinbase has stated its intention to fight for federal oversight, with its Chief Legal Officer, Paul Grewal, asserting that prediction markets are federally regulated national exchanges. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has argued 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. Another prediction market provider, Kalshi, was not named in the lawsuit but has preemptively sued the New York State Gaming Commission, seeking a ruling that state gambling laws do not apply to its platform. New York State Attorney General Letitia James has stated that both Gemini and Coinbase's products are 'illegal gambling operations', emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.