New York sued Coinbase and Gemini on Tuesday, becoming the latest state to claim that the prediction market’s contracts covering sports, entertainment and elections violate state gambling laws.
According to the lawsuits, Coinbase and Gemini’s prediction market offerings are actually unlicensed gaming products, underscoring how the companies advertised their prediction markets and their role as sportsbooks on the platforms. The NYAG office also described the actual behavior of prediction market platforms, describing users as “bettors” and asserting that “every contract is a bet.” The lawsuits also argued that the platforms allow people to place bets between the ages of 18 and 21, while New York prohibits anyone under 21 from gambling on mobile apps.
“As described above, what Defendant offers through its platform is essentially a game of chance: it allows a bettor to wager or risk money on the outcome of a contest of chance or contingent future event that is not under the control or influence of the bettor, based on an agreement or understanding that he or she will receive something of value in the event of a certain outcome,” the lawsuit against Coinbase states.
New York is just the latest state to sue prediction market providers for their sports and entertainment products. Nevada, Washington and many other states have also filed suit, arguing that at least sports betting is indeed gambling and not federally regulated exchanges. It’s an issue that is now before many appeals courts and will likely end up before the U.S. Supreme Court.
Coinbase General Counsel Paul Grewal said in a post on
Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets – including sports-related contracts – fall under the “exclusive jurisdiction” of his agency. The CFTC filed suit against Arizona, Connecticut, and Illinois to prevent them from filing suit against prediction market providers, and it asked to join another case in Nevada to defend prediction market providers.
Kalshi, one of the largest providers of prediction markets, was not named as a defendant Tuesday. The company preemptively sued the New York State Gaming Commission last fall, asking a federal court to rule that the state’s gambling laws do not apply to its platform. This case remains under review in the Southern District of New York Courthouse.
In a statement, New York State Attorney General Letitia James said the Gemini and Coinbase products were “illegal gambling operations.”
“Gaming by any other name remains a game of chance, and it is not exempt from regulation under our state laws and Constitution,” she said.
