On Tuesday, New York filed a lawsuit against Coinbase and Gemini, asserting that their predictive market offerings, which involve sports, entertainment, and elections, are in violation of state gambling laws. The lawsuits claim that these offerings are essentially unlicensed gambling products, citing the companies' advertising strategies and their role as bookmakers.
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 argue 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. The state's lawsuit against Coinbase stated, 'What the 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 action against predictive market providers, as Nevada, Washington, and other states have filed similar lawsuits, arguing that sports-related bets are indeed bets and not federally regulated swaps.
This issue is currently being reviewed by multiple appeals courts and may eventually be heard by the U.S. Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, stated that 'predictive markets are federally regulated national exchanges' and that the company would fight for federal oversight. A Gemini spokesperson declined to comment. Commodity Futures Trading Commission Chairman Mike Selig has argued that predictive markets, including sports-related contracts, fall under his agency's exclusive jurisdiction.
The CFTC has filed lawsuits against Arizona, Connecticut, and Illinois to prevent them from bringing charges against predictive market providers. Kalshi, a major predictive market provider, was not named as a defendant and 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 stated that both Gemini and Coinbase's products are 'illegal gambling operations,' adding that 'gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.'