New York State sues Coinbase and Gemini: Accuses prediction market products of "illegal gambling operations"

New York State officially filed lawsuits against Coinbase and Gemini on Tuesday, accusing these two cryptocurrency exchanges of offering prediction market contracts (covering sports events, entertainment activities, and elections) that violate the state’s gambling laws, becoming the latest state government to take legal action against prediction market providers after Nevada, Washington, and others.
According to the complaints, Coinbase and Gemini’s prediction market products are essentially “unauthorized gambling products.” The lawsuits not only highlight how these companies promote prediction markets but also directly state that they are acting as “bookmakers” on their platforms.
The New York Attorney General’s Office further described the operation of these platforms, directly defining users as “bettors,” and asserting that “each contract is a wager.” The complaints also mention that New York explicitly prohibits individuals under 21 from using mobile apps to participate in gambling, yet these two platforms allow young people aged 18 to 21 to easily place bets.
New York Attorney General Letitia James stated in a release that Gemini and Coinbase’s products are “illegal gambling activities,” and she said:

Gambling remains gambling regardless of how it is disguised, and it cannot be exempt from our state’s laws and constitutional oversight.

The complaint against Coinbase states: “As previously mentioned, the services offered by the defendant platforms are inherently gambling: allowing bettors to wager money on games of chance or on future events they cannot control or influence; the mutual understanding is that, if certain outcomes occur, bettors will receive valuable returns.”
In fact, New York is not the first. Recently, several states including Nevada and Washington have also filed lawsuits against providers of sports and entertainment prediction products. The stance of these state governments is quite clear: at least for betting related to sports events, this is purely “gambling,” not “swap contracts” regulated by the federal government. This definitional dispute is currently escalating through multiple appeals in local courts and may eventually reach the U.S. Supreme Court.
In response to New York’s aggressive lawsuit, Coinbase General Counsel Paul Grewal strongly countered on social platform X, emphasizing that “prediction markets are federally regulated nationwide exchanges,” and stated that the company will firmly defend its position under federal regulation; meanwhile, a Gemini spokesperson declined to comment.
In the tug-of-war between federal and local regulatory authority, U.S. Commodity Futures Trading Commission (CFTC) Chairman Mike Selig expressed support for the industry players. He argued that prediction markets, including those based on sports contracts, should fall entirely under the “exclusive jurisdiction” of the CFTC.
To this end, the CFTC has even filed lawsuits against states like Arizona, Connecticut, and Illinois, attempting to prevent local governments from taking enforcement actions against prediction market operators; at the same time, the CFTC has also proactively intervened in another lawsuit in Nevada to support the industry.
Notably, the large prediction market platform Kalshi was not named as a defendant in Tuesday’s lawsuit. The reason is that the company had already “preempted” the action by proactively filing a lawsuit last fall against the New York State Gaming Commission, asking a federal court to rule that New York’s gambling laws do not apply to the platform. This case is currently pending in the Southern District of New York.

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