Coinbase moves New York prediction markets lawsuit to federal court

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Coinbase moves NY lawsuit

Highlights

Coinbase moved the New York Attorney General’s lawsuit over its prediction markets from state court to federal court, citing federal law preemption.
The New York lawsuit targets both Coinbase and Gemini Titan, seeks fines, forfeiture, customer restitution, and an injunction unless platforms comply with state law.
Coinbase’s action escalates jurisdictional conflict between states and the CFTC as 11 states pursue legal action and the CFTC challenges state regulation of federally approved event contracts.

Federal law dispute takes center stage

As reported by Cointelegraph, Coinbase chief legal officer Paul Grewal said Wednesday that the company has removed New York Attorney General Letitia James’ lawsuit from state court to federal court, arguing the case raises disputed and substantial questions of federal law and is subject to complete preemption.

Grewal said in a post on X that the action belongs in federal court because the core issue is how event contracts are regulated. The case follows a lawsuit filed Tuesday against Coinbase Financial Markets and Gemini Titan, which alleges their prediction market offerings violate New York gambling law by letting users wager on sports, entertainment and elections without a state gaming license, including users aged 18 to 20.

The New York lawsuit seeks fines, forfeiture of alleged illegal profits and restitution for customers. It also asks the court to stop the companies from offering similar products in the state unless they comply with New York law.

Broader stakes for regulation and market oversight

Coinbase’s move sharpens a broader conflict over who regulates prediction markets in the U.S., with implications for platforms including Coinbase and Gemini. Grewal said Tuesday that prediction markets are federally regulated national exchanges under the CFTC and that the company will continue to fight for the federal oversight of these markets that Congress intended.

State authorities have increased pressure in recent months, with 11 states pursuing legal action aimed at asserting control over prediction market platforms. Coinbase launched prediction markets across all 50 U.S. states, including New York, on Jan. 28, offering trades tied to real-world outcomes across sports, politics and culture.

The New York case adds to a growing split between state regulators and the CFTC. On April 2, the CFTC filed three lawsuits against gaming regulators in Illinois, Connecticut and Arizona, arguing those states cannot apply gambling laws and licensing requirements to event contracts listed on CFTC-regulated platforms, and on April 8 the CFTC and U.S. Department of Justice asked a federal court to block Arizona from enforcing state gambling law against Kalshi’s event contracts.

In our earlier coverage of New York’s lawsuits against Coinbase and Gemini over prediction market offerings, we explained how state officials argue these event contracts amount to unlicensed gambling tied to sports, entertainment, and elections. The piece also highlighted the widening multi-state clash with the CFTC’s position that such products fall under federal jurisdiction—setting up the broader fight over who ultimately regulates prediction markets in the U.S.

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