New York state filed a lawsuit against cryptocurrency exchanges Coinbase and Gemini over prediction-market products.

On April 21, blockchain media outlet CoinDesk reported that New York said the two companies' prediction-market contracts tied to sports, entertainment and elections are unlicensed gambling products that violate state gambling law. New York Attorney General Letitia James (러티샤 제임스) described the Coinbase and Gemini products as illegal gambling operations. She said gambling under a different name is still gambling and cannot avoid regulation under state laws and the constitution.

The complaint said the two companies' prediction-market services are effectively gambling products. New York wrote that the companies functioned like bookmakers, citing how they promoted the prediction markets and their role within the platforms. It defined users as betting participants and viewed each contract as a single bet. It also alleged the two platforms allowed users aged 18 and older but under 21 to participate. New York prohibits participation by those under 21 in mobile app gambling.

In its complaint against Coinbase, New York presented that conclusion more directly. It described the service as a typical form of gambling in which users wager money on game outcomes or future events beyond their control or influence and receive consideration if a specific outcome occurs.

The lawsuit is not limited to New York state. Other states including Nevada and Washington have filed similar lawsuits over prediction-market products related to sports and entertainment. These states in particular view sports-related contracts as actual betting rather than swaps subject to federal regulation. The related issues are being handled in multiple appeals courts, and the possibility has also been raised that they could go to the U.S. Supreme Court.

Coinbase is pushing back, citing federal jurisdiction. Paul Grewal (폴 그레월), Coinbase's chief legal officer, said in a post on X, formerly known as Twitter, that prediction markets are a nationwide exchange subject to federal regulation and that the company will respond to comply with federal oversight.

The U.S. Commodity Futures Trading Commission (CFTC) has also shown a different position from state governments. Commissioner Mike Selig (마이크 셀리그) said prediction markets, including sports-related contracts, fall under the commission's exclusive jurisdiction. The CFTC filed a lawsuit against Arizona, Connecticut and Illinois to block enforcement actions against prediction-market operators, and it joined the Nevada case to defend the operator side.

Kalshi, a major prediction-market operator, was not included as a defendant in the lawsuit. Kalshi filed a lawsuit first last fall against the New York State Gaming Commission and has asked a federal court to determine that state gambling law does not apply to its platform. The case is pending in the U.S. District Court for the Southern District of New York.