New York sues Coinbase and Gemini over prediction market offerings

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NY sues Coinbase & Gemini

Highlights

New York filed lawsuits against Coinbase and Gemini on Tuesday, alleging their prediction market products constitute unlicensed gambling operations targeting users between 18 and 21 years old.
New York joins Nevada and Washington in legal actions classifying sports and entertainment prediction contracts as state-regulated gambling, countering claims of federal Commodity Futures Trading Commission oversight.
The CFTC continues to litigate in multiple states and has intervened in Nevada cases, while Kalshi seeks a federal court ruling to exempt its platform from state gambling laws, with its case ongoing.

State complaint targets gambling classification

As reported by CoinDesk, lawsuits filed Tuesday by the New York attorney general argue that the prediction market products offered through Coinbase and Gemini are unlicensed gambling operations under state law.

The complaints say the companies' offerings function as betting products, citing how the platforms market the contracts and their alleged role as bookmakers. New York's office describes users as "bettors" and says each contract amounts to a bet on a contest of chance or a future event outside the user's control.

The suits also say the platforms permit wagers by people between 18 and 21 years old, while New York prohibits mobile app gambling by anyone under 21. In a statement, New York State Attorney General Letitia James says the products sold by both companies are "illegal gambling operations" and adds that gambling remains gambling even when presented under another name.

Federal oversight fight widens across states

New York joins Nevada, Washington and other states that have moved against prediction market providers over sports and entertainment contracts. Those states argue that at least sports-related contracts are bets rather than federally regulated swaps, a dispute that is now before multiple appeals courts and is likely to reach the U.S. Supreme Court.

Coinbase Chief Legal Officer Paul Grewal says in a post on X that prediction markets are federally regulated national exchanges and that Coinbase will fight for federal oversight. Commodity Futures Trading Commission Chairman Mike Selig also argues that prediction markets, including sports-related contracts, fall under the agency's exclusive jurisdiction.

The CFTC has already sued Arizona, Connecticut and Illinois to block enforcement actions against prediction market providers, and it has sought to join a Nevada case to defend them. Kalshi, one of the largest providers, is not named in Tuesday's action after it sued the New York State Gaming Commission last fall to seek a federal ruling that state gambling laws do not apply to its platform; that case remains pending in the Southern District of New York.

Kalshi’s planned launch of regulated crypto perpetual futures in the U.S. outlined how the prediction-market operator is leveraging its CFTC licenses to move deeper into onshore derivatives. Our earlier report also noted that this expansion brings Kalshi into more direct competition with Coinbase and Gemini as the lines blur between event-based contracts and crypto trading products.

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