New York sues Coinbase and Gemini, seeking to halt unlicensed prediction market businesses
New York is suing Coinbase and Gemini, two of the newest players in the prediction market industry, arguing that the companies' unregulated and unlicensed platforms are illegal gambling operations.Attorney General Letitia James' lawsuit, filed Tuesday in state court in Manhattan, seeks to bar the companies' platforms from operating in the state unless and until they obtain 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 said in a statement. Gemini and Coinbases so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails. Messages seeking comment were left for Coinbase and Gemini. Both companies began as cryptocurrency trading platforms before branching into the prediction space, which has been dominated by Kalshi and Polymarket.Gemini, founded by brothers Cameron and Tyler Winklevoss, launched Gemini Predictions in December. Coinbase started its prediction markets service in January.Crypto was just the beginning, Geminis website said Tuesday, next to a prediction box offering bets on such things as the winner of that day's Chelsea-Brighton Premier League soccer match, when Kevin Warsh will be confirmed as the chairman of the Federal Reserve, and what the price of oil will be Friday.New York's lawsuit alleges that the 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 says, 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. In addition, the lawsuit says, Coinbase and Gemini allow users as young as 18, while state law prohibits wagering by anyone under 21. Kalshi sued the state Gaming Commission in October after the commission sought to bar the company's prediction market business from operating in the state. In the case, which is ongoing, Kalshi argues that, as a federally designated derivatives exchange, it is subject to the exclusive jurisdiction of the federal regulator, the Commodity Futures Trading Commission.Coinbase made the same argument in December when it sued Connecticut, Michigan and Illinois to block those states from attempting to regulate its prediction business. Earlier this month, the Commodity Futures Trading Commission sued Arizona, Connecticut, and Illinois to block them from policing prediction markets.Last week, a federal judge halted Arizonas regulatory efforts which have included criminal charges against Kalshi finding that the federal commission had demonstrated a reasonable chance of success in showing that the act preempts Arizona law.In February, James issued what her office described as a consumer alert warning, saying that prediction markets operating without the supervision of the state Gaming Commission were putting New Yorkers at significant financial risk. Some users who say they've lost money on the sites have filed lawsuits against them.James herself has been the subject of prediction market wagering.Last year, as the Trump administration was scrutinizing the Democrat's real estate transactions, Polymarket saw $18,700 in trades on the question: Will Letitia James be charged with a crime by December 31?James was indicted in October, but a judge dismissed the case a month later, concluding that the prosecutor who brought the charges at President Donald Trumps urging was illegally appointed by the Justice Department. James had denied wrongdoing. Meanwhile, Kalshi has seen $12,660 in trades on the outcome of this year's election for New York attorney general. As of Tuesday, 93% of users were predicting James to win a third term.
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