Coinbase and Gemini Face New York Legal Action Over Prediction Market Operations
Legal action from Attorney General Letitia James claims Coinbase and Gemini operated prediction markets without proper licensing, intensifying regulatory scrutiny of crypto platforms as state authorities work to control event-based trading services.
Legal complaints have been filed by New York's attorney general targeting cryptocurrency exchange platforms Coinbase Financial Markets and Gemini Titan over alleged state gambling law violations, based on court documents referenced by Reuters.
According to Reuters, the complaint documents reveal that the state is accusing both cryptocurrency exchanges of failing to secure proper licensing from the New York State Gaming Commission before launching their marketplace operations.
"Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,"Attorney General Letitia James said in a statement.
According to James, the legal action aims to reclaim profits allegedly obtained unlawfully through prediction market operations within the state's borders, along with seeking restitution, while also pursuing an injunction preventing Coinbase and Gemini from providing these services to anyone younger than 21 years old.
State regulators crack down on prediction markets
This legal maneuver aligns with a wider regulatory campaign by state-level authorities, New York included, seeking to exert jurisdiction over prediction markets, a rapidly expanding segment of cryptocurrency-based commerce enabling participants to wager on outcomes of real-world occurrences.
A significant portion of recent regulatory attention has focused on services such as Polymarket and Kalshi, which have sparked debate regarding whether these offerings should be classified under financial regulatory frameworks or gambling statutes.
This regulatory conflict has escalated to federal authorities as well. The Commodity Futures Trading Commission (CFTC) has initiated legal proceedings against multiple states that are attempting to assert regulatory authority over prediction markets, maintaining that it possesses exclusive jurisdiction over this industry sector.
The lawsuit filed by New York highlights a significant challenge facing cryptocurrency businesses. Despite a more accommodating federal regulatory environment, enforcement actions at the state level continue unabated. Through their focus on prediction-market offerings, regulators appear to be establishing a new enforcement battleground — one that may compel platforms to fundamentally reconsider their service delivery strategies in significant regulatory jurisdictions.
However, not all industry participants are accepting these actions passively. According to Cointelegraph's earlier reporting, Polymarket has initiated litigation against Massachusetts, contending that the state does not possess the legal authority to impose regulations on prediction markets that have received approval from the CFTC.
