In a recent lawsuit, New York has targeted Coinbase and Gemini, alleging that their predictive market products are essentially unlicensed gambling offerings. The lawsuit highlights how these companies advertise their predictive markets and function as bookmakers, which, according to the New York Attorney General's office, equates to gambling. It's pointed out that users are referred to as 'bettors,' and each contract is considered a bet, further solidifying the claim that these platforms facilitate gambling.
Moreover, the suit argues that these platforms allow individuals between the ages of 18 and 21 to place bets, which contradicts New York's laws that prohibit anyone under 21 from participating in mobile app gambling. The lawsuit against Coinbase explicitly states that the platform's offerings are quintessentially gambling, as they involve staking money on the outcome of events beyond the bettor's control, with the understanding that the bettor will receive something of value based on the outcome.
This legal action is part of a broader trend, with states like Nevada and Washington also taking similar steps against predictive market providers, asserting that at least sports-related bets are indeed gambling and not federally regulated swaps. The issue is currently before multiple appeals courts and is likely to reach the U.S.
Supreme Court. In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that prediction markets are federally regulated and fall under national exchanges, indicating that Coinbase will advocate for federal oversight.
Gemini, on the other hand, has declined to comment. The Commodity Futures Trading Commission Chairman, Mike Selig, has supported the notion that prediction markets, including those related to sports, fall under the exclusive jurisdiction of his agency.
The CFTC has taken legal action against several states to prevent them from charging prediction market providers, further complicating the regulatory landscape. Notably, Kalshi, a major prediction market provider, was not included in the lawsuit and 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 has emphasized that both Gemini and Coinbase's products constitute 'illegal gambling operations,' underscoring that regardless of the terminology used, gambling is subject to state laws and constitutional regulations.