The state of New York has filed a lawsuit against Coinbase and Gemini, joining the growing list of states arguing that prediction market contracts involving sports, entertainment, and elections infringe upon state gambling regulations. The lawsuits contend that the prediction market offerings by Coinbase and Gemini are essentially unlicensed gambling products, highlighting how these companies have advertised their prediction markets and their role as bookmakers. The New York Attorney General's office has described the behavior of these platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' Furthermore, the suits argue that the platforms permit individuals between the ages of 18 and 21 to place bets, which is in contravention of New York's laws that prohibit anyone under 21 from engaging in mobile app gambling.
The lawsuit against Coinbase asserts that the platform's offerings constitute gambling, as they allow bettors to stake money on the outcome of events beyond their control. This issue is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers. The matter 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 and the company will advocate for federal oversight. Gemini declined to comment on the matter. The Commodity Futures Trading Commission has also weighed in, arguing that prediction markets fall under its jurisdiction.
Meanwhile, Kalshi, a major prediction market provider, was not named in the lawsuit and is currently awaiting a federal court ruling on whether state gambling laws apply to its platform. New York State Attorney General Letitia James has characterized the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.