On April 21, New York Attorney General Letitia James took legal action against Coinbase Financial Markets and Gemini Titan, alleging violations of state gambling laws through their prediction-market products.
The lawsuits, as detailed by Reuters, accuse both cryptocurrency platforms of enabling users to place bets on uncertain outcomes related to sports, entertainment, and elections, all without necessary licenses from the New York State Gaming Commission. The Attorney General’s office asserts that these products fall within New York’s definition of gambling, as the outcomes are uncertain, not within the bettor’s control, and based on chance.
Legal actions seek various penalties including fines, forfeiture of profits deemed illegal, and restitution for affected customers. These complaints were filed in a Manhattan state court and aim to prevent the platforms from operating in New York unless they secure the requisite Gaming Commission licenses.
### Gambling Law Considerations
James has categorically classified these prediction-market products as gambling, irrespective of their labeling. She stated, “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.”
Additionally, the lawsuits raised consumer protection issues, pointing out that these platforms are accessible to users aged 18 to 20, while New York’s mobile sports betting laws restrict participation to those aged 21 and older. Furthermore, the lawsuits allege breaches of regulations concerning betting on New York college teams.
James emphasised that these “so-called prediction markets are just illegal gambling operations,” warning that they expose younger individuals to potentially addictive betting platforms without adequate safeguards in place.
These lawsuits represent another state-level challenge for a sector that is currently at a crossroads between federally regulated derivatives and state gambling regulations, with platforms like Polymarket and Kalshi at the forefront of this issue. For instance, Kalshi has responded by suing the New York State Gaming Commission in Manhattan federal court, asserting that New York lacks jurisdiction over its markets since Kalshi operates under the Commodity Futures Trading Commission (CFTC) regulations.
The entire scenario underscores the ongoing legal and regulatory tensions surrounding cryptocurrency products and the implications for their future viability in the market, particularly within highly regulated states like New York.
