The state of New York has filed lawsuits against Coinbase and Gemini, alleging that their prediction market offerings, which encompass sports, entertainment, and elections, are in violation of state gambling regulations. The lawsuits contend that these platforms are essentially providing unlicensed gambling products, as evidenced by their marketing strategies and the role they play as bookmakers.
Furthermore, the New York Attorney General's office has highlighted that the platforms permit individuals between the ages of 18 and 21 to place bets, despite New York's prohibition on gambling for those under 21 on mobile apps. The suits argue that the prediction market platforms facilitate betting, with users being referred to as 'bettors' and each contract being deemed a 'bet.' New York is not the only state to take legal action against prediction market providers, as Nevada, Washington, and several other states have also filed lawsuits, asserting that sports-related bets are indeed a form of gambling and not federally regulated swaps. This issue is currently pending 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 national exchanges and that Coinbase would advocate for federal oversight. A spokesperson for Gemini declined to comment. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that prediction markets, including sports-related contracts, fall under the agency's exclusive jurisdiction.
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 has described the products offered by Gemini and Coinbase as 'illegal gambling operations,' emphasizing that gambling, regardless of its form, is subject to regulation under state laws and the Constitution.