New York Attorney General Letitia James filed lawsuits against Coinbase Financial Markets and Gemini Titan on Monday, alleging the companies are operating illegal gambling operations within the state. The lawsuits, filed in a Manhattan state court, seek to bar the platforms from operating in New York until they obtain proper licenses from the state Gaming Commission.
According to reports from r/cryptocurrency and r/technology, the litigation targets prediction markets that allow users to trade on outcomes such as sports results, election results, and economic indicators. The Attorney General's office contends these 'event contracts' are simply gambling under a different name designed to bypass state regulation.
“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James stated, according to reports from r/technology. She further alleged that these platforms expose young people to addictive services that lack necessary consumer protections.
Regulatory Conflict and Federal Preemption
The legal battle highlights a growing jurisdictional dispute between state and federal authorities. Coinbase Chief Legal Officer Paul Grewal responded on X, arguing that prediction markets fall under the oversight of the federal Commodity Futures Trading Commission (CFTC) and that federal law preempts state gambling statutes, as reported by r/cryptocurrency.
New York's lawsuit specifically alleges that Coinbase and Gemini are attempting to avoid the financial responsibilities of licensed gambling operators. The state claims that licensed mobile sportsbooks and casinos are taxed at approximately 51% of gross revenues, a burden the lawsuit says these crypto-based platforms are avoiding.
Additionally, the litigation alleges that while state law prohibits wagering for anyone under the age of 20, the Coinbase and Gemini platforms allow users as young as 18 to participate.
This legal action follows a pattern of similar regulatory challenges. r/technology reports that Kalshi previously sued the state Gaming Commission after the commission attempted to block its operations. Kalshi maintains it is a federally designated derivatives exchange subject to the exclusive jurisdiction of the CFTC.
Coinbase has also engaged in similar litigation, having sued Connecticut, Michigan, and Illinois to block state-level regulation of its prediction business. Meanwhile, the CFTC itself has recently sued Arizona, Connecticut, and Illinois to prevent them from policing prediction markets, according to r/technology.
