The state of New York has filed a lawsuit against Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. The lawsuit claims that these platforms have been operating in violation of state laws by allowing users to place bets on sports, entertainment, and election outcomes. According to the lawsuit, the platforms have been advertising their predictive markets and acting as bookmakers, with users being referred to as "bettors" and each contract being deemed a "bet." Furthermore, the lawsuit argues that the platforms have been permitting 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 states, "What the respondent offers through its platform is essentially gambling, allowing a bettor to stake or risk money on the outcome of a contest of chance or a future event not under the bettor's control, with the understanding that they will receive something of value if a certain outcome occurs." This legal action is the latest in a series of lawsuits filed by states, including Nevada and Washington, against predictive market providers over their sports and entertainment products.
The issue is currently before multiple appeals courts and is likely to be heard by the US Supreme Court. In response to the lawsuit, Coinbase's Chief Legal Officer, Paul Grewal, stated that predictive markets are federally regulated national exchanges and that the company would fight for federal oversight. Gemini declined to comment on the matter.
The Commodity Futures Trading Commission Chairman, Mike Selig, has argued that predictive markets, including sports-related contracts, fall under the agency's exclusive jurisdiction. The CFTC has filed lawsuits against several states to block them from bringing charges against predictive market providers.
Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit, having previously sued the New York State Gaming Commission to rule that state gambling laws do not apply to its platform. New York State Attorney General Letitia James stated that both Gemini and Coinbase's products are "illegal gambling operations," adding that "gambling by another name is still gambling and is not exempt from regulation under our state laws and Constitution."