NY Sues Coinbase, Gemini Over Prediction Markets

New York is suing Coinbase and Gemini over unregulated and unlicensed prediction market platforms that the state contends 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, the AP reports.

• "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 Coinbase's so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails."

• 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," Gemini's 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 Fed, and what the price of oil will be on 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.'" Reuters reports that the lawsuit is seeking fines equivalent to triple the companies' prediction market profits, restitution to customers, and restrictions on the companies' marketing on college campuses.

• 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. "Coinbase will continue to fight for the federal oversight of these markets that Congress intended," Coinbase Chief Legal Officer Paul Grewal said in response to the lawsuit Tuesday, per Reuters.
• Earlier this month, the Commodity Futures Trading Commission sued Arizona, Connecticut, and Illinois to block them from policing prediction markets.