On Tuesday, New York filed a lawsuit against Coinbase and Gemini, contending that their prediction market offerings, which cover sports, entertainment, and elections, are in fact unlicensed gambling products that contravene state laws. The lawsuit highlights how these companies have advertised their prediction markets and acted as bookmakers, further emphasizing the argument. The New York Attorney General's office pointed out that the platforms' operations, including allowing users between 18 and 21 to place bets, violate New York's age restrictions on mobile gambling.
The state argues that these platforms facilitate quintessential gambling by allowing bettors to stake money on outcomes beyond their control, with the understanding of receiving something of value based on specific outcomes. This lawsuit follows similar actions by other states, including Nevada and Washington, which have also sued prediction market providers, arguing that their sports-related products constitute gambling rather than federally regulated swaps. The issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that prediction markets are federally regulated and the company will advocate for federal oversight. Gemini declined to comment. The Commodity Futures Trading Commission Chairman has supported the notion that prediction markets fall under the agency's jurisdiction, and the CFTC has taken legal action against several states to prevent them from charging prediction market providers. Notably, Kalshi, a major prediction market provider, was not named in the lawsuit and had previously taken preemptive legal action against the New York State Gaming Commission.
New York State Attorney General Letitia James described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its name, is subject to state laws and regulations.