New York Sues Coinbase and Gemini Over Alleged Illegal Prediction Market Gambling

New York has filed lawsuits against cryptocurrency exchanges Coinbase and Gemini, accusing them of offering prediction market products that violate state gambling laws. The legal action marks the latest move by state regulators targeting platforms that provide contracts tied to outcomes in sports, entertainment, and political events.

According to the New York Attorney General’s office, the prediction market offerings function as unlicensed gambling services rather than legitimate financial instruments. The lawsuits claim that users are essentially placing bets on uncertain future outcomes, with each contract representing a wager. Regulators emphasized that these platforms allegedly act as bookmakers, promoting and facilitating betting activity while framing it as trading.

The complaint further highlights concerns about age restrictions, noting that individuals between 18 and 21 may be able to participate in these markets, despite New York laws prohibiting mobile gambling for anyone under 21. Authorities argue that this violates state regulations designed to protect younger users from gambling-related risks.

New York joins several other states, including Nevada and Washington, that have taken legal action against prediction market providers. The core issue revolves around whether these contracts should be classified as gambling or as federally regulated financial products such as derivatives. This ongoing legal debate has already reached multiple appeals courts and could ultimately be decided by the U.S. Supreme Court.

Coinbase has pushed back against the allegations, with Chief Legal Officer Paul Grewal stating that prediction markets fall under federal oversight and operate as regulated exchanges. Meanwhile, the Commodity Futures Trading Commission (CFTC) maintains that it has exclusive jurisdiction over these markets and has filed lawsuits to block state-level enforcement actions.

Gemini has not publicly commented on the case. New York Attorney General Letitia James reaffirmed the state’s stance, stating that “gambling by another name is still gambling” and must comply with state laws. The outcome of these cases could have major implications for the future of crypto-based prediction markets in the United States.