New York sues Coinbase, Gemini over prediction market offerings

New York has become the latest state to argue that prediction market contracts touching on sports and entertainment violate state gambling laws.

New York sued Coinbase and Gemini on Tuesday, becoming the latest state to argue that prediction market contracts dealing with sports, entertainment and elections are violating state gambling laws.

According to the lawsuits, Coinbase and Gemini's prediction market offerings are really 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 "each contract is a bet." The suits also argued that the platforms allow people to place bets between the ages of 18 and 21, when New York bars anyone under 21 from gambling on mobile apps.

"As described above, 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," the suit against Coinbase said.

New York is just the latest state to sue prediction market providers over 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, indeed, bets, and not federally regulated swaps. It's an issue that now sits before multiple appeals courts, and is likely to wind up before the U.S. 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.

Commodity Futures Trading Commission Chairman Mike Selig, for his part, 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 out of Nevada to defend the prediction market providers.

Kalshi, one of the biggest 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 state gambling laws do not apply to its platform. That case is still working its way through the Southern District of New York courthouse.

In a statement, New York State Attorney General Letitia James said both Gemini and Coinbase's products were "illegal gambling operations."

"Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution," she said.

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