New York Sues Coinbase, Gemini Over Betting Apps

New York files lawsuit against Coinbase and Gemini, calling their prediction markets illegal gambling platforms.

New York Targets Prediction Market Platforms NEW YORK (AP) — New York is suing Coinbase and Gemini, two major entrants in the growing prediction market industry, arguing that their unregulated platforms function as illegal gambling operations. Attorney General Letitia James filed the lawsuit in Manhattan state court, seeking to block the companies from operating in the state unless they obtain proper licenses from the Gaming Commission. James stated that labeling these platforms differently does not exempt them from gambling laws and warned they expose young users to potentially addictive systems without adequate protections. Both companies, originally known for cryptocurrency trading, have recently expanded into prediction markets alongside competitors such as Kalshi and Polymarket.

Allegations of Illegal Gambling and Regulatory Avoidance The lawsuit claims that Coinbase and Gemini offer betting-like products disguised as “event contracts.” By operating without licenses, they avoid the significant taxes imposed on regulated casinos and sportsbooks, which can reach around 51% of gross revenue. The complaint also raises concerns about age restrictions, noting that users as young as 18 can participate, while state law sets the minimum gambling age at 21. Gemini, founded by Cameron and Tyler Winklevoss, launched its prediction platform in December, followed by Coinbase’s entry in January.

Broader Legal Battle Over Prediction Markets The case reflects a larger national dispute over how prediction markets should be regulated. Companies like Kalshi argue they fall under federal oversight as derivatives exchanges regulated by the Commodity Futures Trading Commission rather than state authorities. Coinbase has made similar claims in legal challenges against multiple states. Meanwhile, federal regulators have also intervened, suing states such as Arizona and Connecticut to prevent them from enforcing local restrictions. A recent federal court decision paused Arizona’s efforts, indicating that federal law could take precedence over state regulation.

Consumer Risks and Political Context Earlier this year, Attorney General James issued a consumer alert warning that unregulated prediction markets could expose users to significant financial losses, and some users have already filed lawsuits over their experiences. These platforms have also been used to speculate on political outcomes, including races involving James herself. Despite past controversies, users on prediction platforms currently favor her to win a third term as New York’s attorney general.