In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their prediction market offerings, which cover sports, entertainment, and election outcomes, are essentially unlicensed gambling products. The lawsuit points out that these platforms have been advertised and operated as if they were traditional betting platforms, with the companies acting as bookmakers. Furthermore, the lawsuit highlights that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's law that prohibits anyone under 21 from engaging in mobile app gambling. The New York Attorney General's office has described the behavior of these platforms as facilitating bets, with each contract being a wager.
This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against prediction market providers, arguing that at least sports-related bets should be classified as 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 has stated that prediction markets are under federal regulation and the company will advocate for federal oversight. Gemini has declined to comment on the matter. The Commodities Futures Trading Commission has also weighed in, asserting its jurisdiction over prediction markets, including those related to sports. This development comes as one of the major prediction market providers, Kalshi, was not named in the lawsuit but is already engaged in a legal battle with the New York State Gaming Commission over the applicability of state gambling laws to its platform.