In a recent lawsuit filed on Tuesday, New York has sued Coinbase and Gemini, alleging that their predictive market offerings constitute unlicensed gambling products. According to the lawsuit, these platforms have been promoting their predictive markets and acting as bookmakers, which is against state laws. The lawsuit also highlights that the platforms allow individuals between the ages of 18 and 21 to place bets, despite New York's regulations prohibiting anyone under 21 from participating in mobile app gambling. The lawsuit claims that the predictive market platforms are essentially gambling operations, where users stake money on the outcome of events beyond their control.
This development is the latest in a series of lawsuits filed by states, including Nevada and Washington, arguing that predictive market providers are offering bets disguised as federally regulated swaps. The issue is currently pending before multiple appeals courts and may eventually be heard by the US Supreme Court.
In response, Coinbase's Chief Legal Officer, Paul Grewal, has stated that predictive markets are federally regulated national exchanges and that the company will fight for federal oversight. Gemini, on the other hand, has declined to comment on the matter. The Commodity Futures Trading Commission has also weighed in, arguing that predictive markets fall under its jurisdiction. Meanwhile, Kalshi, a major predictive market provider, was not named as a defendant in the lawsuit, having previously sued the New York State Gaming Commission to establish that state gambling laws do not apply to its platform.
New York State Attorney General Letitia James has stated that both Gemini and Coinbase's products are illegal gambling operations, emphasizing that gambling by any other name is still subject to regulation under state laws and the Constitution.