New York AG Sues Coinbase and Gemini Over Prediction Markets, Calling Them Illegal Gambling

New York Attorney General Takes Legal Action Against Major Crypto Exchanges

New York Attorney General Letitia James has filed lawsuits against Coinbase Financial Markets and Gemini Titan, alleging that their prediction markets violate state laws against illegal gambling. The petitions, filed in state court in Manhattan, claim that these platforms operate without the required licenses from the New York State Gaming Commission.

Key Allegations and Regulatory Clash

James described the event contracts offered by Coinbase and Gemini as "quintessentially gambling", arguing that outcomes are based on chance or events outside users' control. She also criticized the companies for allowing 18- to 20-year-olds to use their platforms, despite New York law setting a minimum age of 21 for mobile sports betting.

In response, Coinbase Chief Legal Officer Paul Grewal stated that the company will continue to advocate for federal oversight by the Commodity Futures Trading Commission (CFTC), which it believes is the appropriate regulator for these markets. Gemini has not yet commented on the lawsuit.

Broader Regulatory Battle

This lawsuit is part of a larger conflict between state and federal regulators over the oversight of prediction markets. The CFTC has recently sued several states, including Arizona, Connecticut, and Illinois, to prevent them from regulating these markets, citing its "exclusive regulatory authority" over commodity derivatives. In a related case, a federal appeals court in Philadelphia ruled in favor of Kalshi, affirming that the CFTC has exclusive oversight of its sports-related event contracts, overriding state gaming regulators.

Impact and Demands

Attorney General James is seeking to recoup illegal profits, impose civil fines equal to triple those profits, and provide restitution to affected customers. Additionally, she aims to ban wagers by individuals under 21 and restrict Coinbase and Gemini from marketing on college campuses.

Prediction markets have gained popularity since the 2024 U.S. presidential election, where they proved more accurate than traditional polling in predicting outcomes. Both Coinbase and Gemini launched their prediction markets in mid-December and operate them across all 50 U.S. states.