New York AG Sues Coinbase and Gemini Over Prediction Markets

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New York Attorney General Letitia James sued Coinbase and Gemini on Tuesday, alleging their prediction market platforms operate as unlicensed gambling businesses in violation of state law. The filings cover offerings spanning sports, entertainment, and elections and describe each contract as a bet placed by an unregistered bookmaker.

NYAG Frames Contracts as Bets, Cites Underage Access Concerns

The lawsuits contend that prediction market contracts offered by both platforms are gambling products operating without a license. The NYAG’s office drew on the companies’ own advertising and their roles as bookmakers to support that characterization, describing users as “bettors” and stating that “each contract is a bet.”

The complaint described Coinbase’s offering as “quintessentially gambling”, allowing users to stake money on outcomes outside their control in exchange for a potential payout. The filings further allege that both platforms permit users between the ages of 18 and 21 to participate, violating New York’s mobile gambling regulations, which set the minimum age at 21. James was direct about her office’s position. 

“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution. Both platforms’ products are illegal gambling operations.”

Coinbase Pushes Back, Gemini Declines to Comment

In a post on X, Coinbase Chief Legal Officer Paul Grewal pushed back, writing that “prediction markets are federally regulated national exchanges” and signaling the company would fight for federal oversight to prevail. Gemini declined to comment.

The core legal dispute, whether prediction market contracts are federally regulated swaps or state-regulated gambling products, is now before multiple appeals courts. The dispute may ultimately reach the Supreme Court. 

Jurisdictional Battle Between States and CFTC Intensifies

The CFTC has staked out the opposing position to the states. Acting Chair Mike Selig has argued that prediction markets, including sports contracts, fall under the agency’s exclusive jurisdiction, meaning state gambling laws cannot override federal commodities regulation. 

That argument draws on the Commodity Exchange Act, which grants the CFTC broad authority over swaps and derivatives traded on federally designated contract markets. The CFTC has filed suit against Arizona, Connecticut, and Illinois to block those states from pursuing charges against prediction market providers and has moved to join the Nevada case in active defense of the industry’s federal status.

Kalshi Absent From Tuesday’s Action After Preemptive Legal Move

Not every major operator waited to be named. Kalshi filed a preemptive suit against the New York State Gaming Commission in September 2024, asking a federal court in the Southern District of New York to rule that state gambling laws do not apply to its platform. 

By moving first, Kalshi secured a federal venue for the dispute rather than waiting to be named in a state enforcement action. That case remains pending, and its outcome could influence how other courts rule on the federal-state question more broadly.

With actions now filed across multiple states and the CFTC actively contesting state authority in court, the industry’s legal status may ultimately hinge on federal courts. Coinbase has indicated it intends to challenge New York’s suit and push for federal jurisdiction to govern the space.