On Tuesday, New York filed lawsuits against Coinbase and Gemini, joining the list of states arguing that predictive market contracts involving sports, entertainment, and elections violate state laws on gambling. The lawsuits assert that the predictive market offerings of Coinbase and Gemini are essentially unlicensed gambling products, citing their advertising strategies and the role they play as bookmakers on their platforms. The New York Attorney General's office described the behavior of these platforms, referring to users as 'bettors' and stating that 'each contract is a bet.' The lawsuits also point out that the platforms allow individuals between the ages of 18 and 21 to place bets, which is prohibited in New York for those under 21 using mobile apps. The suit against Coinbase stated, 'As described above, what Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.' New York is not the only state to take legal action against predictive market providers for their sports and entertainment products, as states like Nevada and Washington have also filed similar lawsuits, arguing that at least the sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court.
Coinbase's Chief Legal Officer, Paul Grewal, responded on social media, stating that 'prediction markets are federally regulated national exchanges' and that Coinbase would fight for federal oversight. A Gemini spokesperson declined to comment. Commodity Futures Trading Commission Chairman, Mike Selig, has argued that prediction markets fall under his agency's exclusive jurisdiction, and the CFTC has taken action to block charges against prediction market providers in several states.
Kalshi, a major prediction market provider, was not named as a defendant and had previously sued the New York State Gaming Commission, seeking a federal court ruling 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 were 'illegal gambling operations,' emphasizing that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'