NY sues Coinbase, Gemini for unlawful prediction markets
The state of New York is taking legal action against Coinbase and Gemini, alleging that their prediction market platforms operate without regulation and licensing, which the state argues constitutes illegal gambling activities. Attorney General Letitia James has initiated a lawsuit, filed on Tuesday in state court in Manhattan, aiming to prevent the companies’ platforms from functioning within the state until they secure licenses from the state Gaming Commission. “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James stated. “Gemini and Coinbase’s so-called prediction markets are merely illegal gambling operations, putting young people at risk of addiction on platforms that lack essential safeguards.” Messages seeking comment were left for Coinbase and Gemini. Initially, both companies operated as cryptocurrency trading platforms before expanding into the prediction market, a domain largely controlled by Kalshi and Polymarket.
Gemini, established by siblings Cameron and Tyler Winklevoss, introduced Gemini Predictions in December. Coinbase launched its prediction markets service in January. “Crypto was just the beginning,” Gemini’s website stated on Tuesday, alongside a prediction box that offered bets on various events, including the winner of that day’s Chelsea-Brighton Premier League soccer match, the confirmation date for Kevin Warsh as the chairman of the Federal Reserve, and the anticipated price of oil for Friday. New York’s lawsuit alleges that Coinbase and Gemini are seeking “to avoid the legal and financial consequences” of the state’s close regulation of gambling “by offering what is quintessentially wagering under the guise of offering event contracts’ on a prediction market.'”
By operating without licenses, the lawsuit states, Coinbase’s and Gemini’s prediction market businesses aren’t paying the same taxes as licensed casinos and mobile sportsbooks, which are taxed by the state at a rate of approximately 51% of gross revenues. Furthermore, the lawsuit states that Coinbase and Gemini permit users as young as 18, despite state law prohibiting wagering by individuals under 21. In October, Kalshi initiated legal action against the state Gaming Commission following the commission’s attempt to prohibit the company’s prediction market operations within the state. In the ongoing case, Kalshi contends that, as a federally designated derivatives exchange, it falls under the exclusive jurisdiction of the federal regulator, the Commodity Futures Trading Commission.
In December, Coinbase presented a similar argument when it initiated legal action against Connecticut, Michigan, and Illinois to prevent those states from regulating its prediction business. Earlier this month, the Commodity Futures Trading Commission initiated legal action against Arizona, Connecticut, and Illinois to prevent them from regulating prediction markets. Last week, a federal judge put a stop to Arizona’s regulatory actions, which have involved criminal charges against Kalshi, determining that the federal commission had shown a reasonable likelihood of success in proving that the act supersedes Arizona law.
