In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market products, which involve sports, entertainment, and elections, are essentially unlicensed gambling products. The lawsuit contends that these platforms have been advertised and operated as bookmakers, with users being referred to as 'bettors' and each contract being deemed a 'bet'.
Furthermore, the lawsuit argues that these 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 state's argument is that these prediction markets constitute gambling, as they involve staking money on the outcome of events beyond the bettor's control, with the understanding that a certain outcome will yield something of value. This lawsuit is part of a broader trend, with other states like Nevada and Washington also taking legal action against prediction market providers, arguing that at least sports-related bets should be classified as bets 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. Coinbase has stated its intention to fight for federal oversight, arguing that prediction markets are federally regulated national exchanges. Gemini declined to comment. The Commodity Futures Trading Commission (CFTC) has also weighed in, asserting its exclusive jurisdiction over prediction markets, including those related to sports, and 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 the products offered by Gemini and Coinbase as 'illegal gambling operations', emphasizing that gambling by any other name remains subject to state laws and the Constitution.