In a recent lawsuit, New York targeted Coinbase and Gemini, claiming their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies advertise their prediction markets and act as bookmakers, with users being referred to as 'bettors' and each contract essentially being a bet. The suits also point out that the platforms allow individuals between 18 and 21 to place bets, which is against New York's laws that prohibit anyone under 21 from gambling on mobile apps.
The state argues that the platforms' offerings are fundamentally gambling, where bettors stake money on the outcome of events beyond their control, with the understanding of receiving something of value based on the outcome. This lawsuit is part of a broader trend, with states like Nevada and Washington also taking action against prediction market providers, arguing that their sports-related products are indeed bets and not federally regulated swaps.
The issue is currently before multiple appeals courts and is likely to be taken up by the U.S. Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, asserted that prediction markets are federally regulated and the company will fight for federal oversight. Gemini declined to comment.
The Commodity Futures Trading Commission Chairman, Mike Selig, has stated that prediction markets fall under his agency's exclusive jurisdiction, and the CFTC has taken legal action to block states from charging prediction market providers. Another major prediction market provider, Kalshi, was not named in the lawsuit but had previously 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 described both Gemini and Coinbase's products as 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to regulation under state laws and the Constitution.