In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings constitute unlicensed gambling products. The lawsuit highlights how these companies have advertised their prediction markets and their role as bookmakers, essentially positioning users as 'bettors' where each contract is viewed as a bet. Furthermore, the lawsuit points out that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from participating in mobile gambling. The state's argument is that the essence of these platforms is gambling, where bettors stake money on outcomes not under their control with the understanding of receiving something of value based on the outcome.
This legal action follows similar suits filed by other states, including Nevada and Washington, arguing that such bets are indeed gambling and not federally regulated swaps. The issue is currently pending before multiple appeals courts and is likely to be reviewed 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 on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, asserting that prediction markets fall under the agency's exclusive jurisdiction, and the CFTC has taken legal action to block charges against prediction market providers in several states.
Another significant prediction market provider, Kalshi, was not named in the lawsuit but had previously taken preemptive legal action against 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, regardless of its form, is subject to state laws and regulations.