In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings are essentially unlicensed gambling products. According to the lawsuit, the way these companies advertise their prediction markets and act as bookmakers on their platforms suggests they are facilitating gambling activities.
The lawsuit also highlights that these platforms allow individuals between the ages of 18 and 21 to place bets, which is in direct violation of New York's laws that prohibit anyone under 21 from engaging in mobile app gambling. The state's argument is that these prediction market contracts are, in essence, bets on the outcome of events beyond the control of the bettor, with the potential to receive something of value based on the outcome. 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 bets constitute gambling rather than federally regulated swaps. The issue is currently being debated in multiple appeals courts and is likely to be reviewed by the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are under federal regulation and the company will advocate for federal oversight. Gemini has declined to comment on the matter.
The Commodity Futures Trading Commission (CFTC) has also weighed in, with its Chairman, Mike Selig, asserting that prediction markets, including those related to sports, fall under the agency's jurisdiction. The CFTC has taken legal action against several states to prevent them from pursuing charges against prediction market providers.
Another major prediction market provider, Kalshi, was not named in the lawsuit but has previously taken preemptive legal action against the New York State Gaming Commission, seeking a ruling that its platform is not subject to state gambling laws. New York State Attorney General Letitia James has stated that the products offered by Gemini and Coinbase are 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.