New York sued Coinbase and Gemini on Tuesday, becoming the latest state to argue that prediction market contracts dealing with sports, entertainment and elections violate state gambling laws.
According to the lawsuits, Coinbase and Gemini’s prediction market offerings are truly unlicensed gambling products, pointing to how the companies advertised their prediction markets and their role as bookmakers on the platforms. The NYAG’s office also described the actual behavior of the prediction market platforms, describing users as “bettors” and saying that “every contract is a bet.” The suits also argued that the platforms allow people between the ages of 18 and 21 to place bets, when New York bars anyone under 21 from gambling on mobile apps.
“As described above, what the Respondent offers through its platform is essentially gambling: It allows a player to bet or risk money on the outcome of a contest of chance or a future contingent event not under the player’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a particular outcome,” the suit against Coinbase said.
New York is just the latest state to sue providers of prediction markets for their sports and entertainment products. Nevada, Washington and a host of other states have similarly filed suit, arguing that at least the sports-related bets are actually bets and not federally regulated swaps. It’s an issue now before several appeals courts and likely to end up before the US Supreme Court.
Coinbase Chief Legal Officer Paul Grewal said in a post on X (formerly Twitter) that “prediction markets are federally regulated national exchanges” and that Coinbase would fight for federal oversight.
For his part, Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets — including the sports-related contracts — fall under his agency’s “exclusive jurisdiction.” The CFTC has filed suit against Arizona, Connecticut and Illinois to block them from bringing charges against prediction market providers, and it filed to join another case from Nevada to defend prediction market providers.
Kalshi, one of the largest prediction market providers, was not named as a defendant on Tuesday. The company preemptively sued the New York State Gaming Commission last fall, asking a federal court to rule that the state’s gaming laws do not apply to its platform. That case is still working its way through the courthouse in the Southern District of New York.
In a statement, New York State Attorney General Letitia James said both Gemini and Coinbase’s products were “illegal gambling operations.”
“Gambling by any other name is still gambling and it is not exempt from regulation under our state laws and constitution,” she said.
