New York Attorney General Letitia James filed lawsuits Tuesday against cryptocurrency exchanges Coinbase and Gemini, alleging both companies operate illegal gambling operations through their prediction market services.
The complaints, filed in Manhattan state court, accuse the platforms of running unlicensed gambling operations that allow users to place wagers on real-world events including sports outcomes and elections. According to the attorney general’s office, these prediction markets function identically to traditional betting sites despite the companies’ attempts to distance themselves from gambling terminology.
The lawsuits highlight that users on both platforms can trade on outcomes commonly found on conventional betting sites, such as New York Knicks game results and Super Bowl winners. The platforms allegedly offer point spreads in some contests, a standard feature in sports betting where wagers are placed based on predicted score differences between teams.
James emphasized that regardless of terminology, these operations constitute gambling under state law. The attorney general expressed particular concern about the platforms’ accessibility to younger users, noting that while New York requires participants in mobile sports betting to be at least 21 years old, Coinbase and Gemini permit users aged 18 and older to access their prediction markets.
Prediction markets have grown significantly in popularity in recent years, operating in what many consider a regulatory gray area. These platforms allow participants to purchase shares in potential outcomes, with prices fluctuating based on perceived likelihood. Users can then sell these shares for profit or loss as market conditions change, creating a hybrid model between traditional stock trading and sports betting.
The legal action seeks multiple remedies, including forcing both companies to forfeit profits generated through these services, provide restitution to New York consumers who participated in the markets, and pay penalties equivalent to three times their profits from the disputed activities.
Beyond the general gambling allegations, the attorney general’s complaints cite violations of state-specific regulations prohibiting wagering on college sports teams based in New York. This adds another layer to the legal challenges facing both companies.
Coinbase has responded to the allegations, with Chief Legal Officer Paul Grewal stating that prediction markets are federally regulated national exchanges registered with the Commodity Futures Trading Commission. Grewal indicated the company plans to defend its position, noting that related issues are currently being addressed in federal court. Gemini has not yet publicly responded to the lawsuit.
These cases represent part of a broader enforcement effort by the New York Attorney General’s office against gambling operations in the state. Earlier initiatives included legal action against video game developer Valve over loot box mechanics that allegedly encourage gambling behavior among minors, and cease-and-desist letters sent to more than two dozen online sweepstakes casinos last summer.
The lawsuits against Coinbase and Gemini arrive as prediction markets face increasing scrutiny nationwide. Similar platforms including Kalshi and Polymarket are currently defending against federal lawsuits claiming they function as unregulated sports betting operations. Lawmakers have also raised concerns about these platforms offering wagers on significant geopolitical events, with particular attention to potential insider trading risks.
The outcome of these cases could have substantial implications for the cryptocurrency and prediction market industries, potentially establishing precedents for how these platforms are regulated at the state level.
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