In a recent lawsuit, the state of New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuits highlight how these companies have advertised their prediction markets and acted as bookmakers, with users being referred to as 'bettors' and each contract being deemed a 'bet'. Furthermore, the platforms have been accused of allowing individuals between the ages of 18 and 21 to place bets, despite New York's laws prohibiting anyone under 21 from participating in mobile app gambling. The lawsuit against Coinbase emphasizes that the platform's offerings are essentially gambling, as they involve staking money on the outcome of events beyond the bettor's control.
This development is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers. The issue is currently before multiple appeals courts and may eventually be heard by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer has stated that prediction markets are federally regulated national exchanges and that the company will advocate for federal oversight.
Meanwhile, Gemini has declined to comment on the matter. The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets fall under its exclusive jurisdiction.
As the situation continues to unfold, Kalshi, a major prediction market provider, was not named as a defendant but has previously taken proactive legal action against the New York State Gaming Commission. New York State Attorney General Letitia James has described the products offered by Gemini and Coinbase as 'illegal gambling operations', emphasizing that gambling by any other name remains subject to regulation under state laws and the Constitution.