New York State Sues Coinbase and Gemini, Alleging Illegal Gambling in Prediction Markets
New York State has escalated its regulatory crackdown on cryptocurrency firms, officially filing lawsuits against prominent exchanges Coinbase and Gemini. The state alleges that these platforms’ prediction market contracts, which cover outcomes for sports, entertainment events, and elections, violate New York’s stringent gambling laws. This action positions New York as the latest in a growing list of states, including Nevada and Washington, to pursue legal action against providers of prediction market services.
According to the complaints, Coinbase and Gemini’s prediction market offerings are unequivocally “unlicensed gambling products.” The lawsuits not only scrutinize how these companies promote their prediction markets but also directly accuse them of operating as “bookmakers” on their respective platforms.
The New York State Attorney General’s office further elaborated on the operational specifics, explicitly defining users as “gamblers” and asserting that “each contract is a bet.” A critical point of contention highlighted in the complaints is the alleged violation of state law prohibiting individuals under 21 from participating in mobile gambling. The lawsuits claim that both platforms allowed individuals between 18 and 21 years old to easily place wagers.
New York Attorney General Letitia James issued a strong statement regarding the lawsuits, declaring Gemini and Coinbase’s products to be “illegal gambling activities.” She emphasized:
Gambling by any other name is still gambling and cannot be exempt from our state laws and constitutional oversight.
The complaint against Coinbase articulates the state’s position: “As previously mentioned, the services provided by the defendant platforms are essentially gambling: allowing gamblers to bet money on contests of chance, or on outcomes of future events over which they have no control or influence; the mutual understanding between the parties is that if a specific outcome occurs, the gambler will receive a valuable return.”
A National Battle: Gambling vs. Financial Product
New York’s legal offensive is part of a broader national trend. Several state governments, including Nevada and Washington, have recently initiated lawsuits against operators offering sports and entertainment prediction products. The states’ collective stance is clear: at least concerning sports-related wagers, these are pure “gambling,” not federally regulated “swaps.” This fundamental definitional dispute is currently winding its way through various local court systems and is poised to potentially reach the U.S. Supreme Court.
In response to New York’s aggressive litigation, Coinbase Chief Legal Officer Paul Grewal took to social media platform X, strongly defending the company’s position. He asserted that “prediction markets are federally regulated national exchanges” and affirmed Coinbase’s commitment to defending its federally regulated status. A spokesperson for Gemini, however, declined to comment on the matter.
Adding another layer of complexity to this federal-versus-state regulatory tug-of-war, U.S. Commodity Futures Trading Commission (CFTC) Chairman Mike Selig has voiced strong support for the operators. Selig argues that prediction markets, including those for sports events, should fall exclusively under the “exclusive jurisdiction” of the CFTC.
The CFTC has actively engaged in this debate, filing lawsuits against states such as Arizona, Connecticut, and Illinois to prevent local governments from taking enforcement actions against prediction market operators. Furthermore, the CFTC has intervened in a separate lawsuit in Nevada, bolstering the operators’ defense.
Notably, the large prediction market platform Kalshi was not named as a defendant in New York’s recent lawsuits. This is attributed to Kalshi’s preemptive legal action last fall, when it sued the New York State Gaming Commission. Kalshi sought a federal court ruling that New York’s gambling laws do not apply to its platform, a case that remains ongoing in the U.S. District Court for the Southern District of New York.
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