Tuesday marked the day when New York initiated lawsuits against cryptocurrency firms Coinbase and Gemini, accusing them of operating unlicensed gambling activities through their prediction market offerings involving sports, entertainment, and election outcomes. The state’s legal argument hinges on these platforms functioning as bookmakers, advertising in a manner that promotes gambling, thereby violating local gambling regulations.
The Attorney General’s office detailed the operations of these platforms, labeling users as ‘bettors’ who engage in betting activities where each contract constitutes a wager. It also highlighted that individuals aged 18 to 21 are permitted to place bets via mobile apps, contravening New York laws which prohibit gambling on such devices for those under 21.
The lawsuit against Coinbase specifically states: “What Respondent offers through its platform is quintessentially gambling: It allows a bettor to stake or risk money upon the outcome of a contest of chance or a future contingent event not under the bettor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.”
This lawsuit joins a growing list from other states like Nevada and Washington, who have similarly challenged prediction market providers on similar grounds, asserting these are bets rather than federally regulated swaps. The matter is now under review by multiple appeals courts and may eventually reach the U.S. Supreme Court.
Coinbase’s Chief Legal Officer Paul Grewal responded via a post on X (formerly Twitter), stating that “prediction markets are federally regulated national exchanges” and emphasizing Coinbase’s intent to seek federal oversight.
CFTC Chairman Mike Selig has maintained that prediction markets, including sports-related contracts, fall under the CFTC’s exclusive jurisdiction. The agency has initiated lawsuits against Arizona, Connecticut, and Illinois to prevent them from prosecuting prediction market providers and also intervened in a Nevada case to defend these platforms.
Kalshi, another major player in prediction markets, was not named in Tuesday’s lawsuit but took proactive legal steps last fall by suing the New York State Gaming Commission. The company sought a federal court ruling to clarify that state gambling laws do not apply to its platform, with the case still pending in the Southern District of New York.
New York State Attorney General Letitia James condemned both Gemini and Coinbase’s offerings as “illegal gambling operations.” She emphasized, “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.”