In a lawsuit filed on Tuesday, New York alleged that Coinbase and Gemini's predictive market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms operate as bookmakers, and their users are essentially bettors, with each contract representing a bet. The lawsuit also pointed out 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 using mobile apps. The state argued that the predictive market platforms are, in essence, gambling operations, where individuals stake money on the outcome of events beyond their control, with the understanding that they will receive something of value if a certain outcome occurs.
This lawsuit is part of a broader trend, with states like Nevada and Washington also taking legal action against predictive market providers, arguing that their sports-related products constitute bets rather than federally regulated swaps. The issue is currently before 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.
Gemini declined to comment on the matter. The Commodity Futures Trading Commission Chairman, Mike Selig, has also weighed in, arguing that predictive markets fall under the agency's exclusive jurisdiction.
Another predictive market provider, Kalshi, was not named in the lawsuit but has preemptively 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, regardless of its name, is subject to regulation under state laws and the Constitution.