New York is pressing a new legal challenge against major cryptocurrency-linked firms as prediction markets expand in popularity, suing Coinbase and Gemini in Manhattan on Tuesday and asking a state judge to halt their operation unless they obtain licenses from the state Gaming Commission. Attorney General Letitia James filed the lawsuit in state court, arguing the companies are running what New York views as unlicensed gambling under the label of prediction markets.
In her statement, James said, “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” adding that “Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.” The complaint seeks an order stopping the platforms from operating in New York unless and until they are licensed, according to the lawsuit’s request.
Coinbase and Gemini, the suit says, began as cryptocurrency trading businesses before branching into prediction market services, which have been dominated in recent years by companies including Kalshi and Polymarket. Gemini launched Gemini Predictions in December, and Coinbase began offering prediction markets in January, as described in the complaint and supporting reporting.
The lawsuit also says the companies are trying to sidestep New York’s close regulation of gambling by marketing their services as “event contracts” on a “prediction market.” New York’s case alleges that, despite the branding, the offering is “quintessentially wagering” and should be treated as gambling for regulatory purposes.
New York further argues that operating without licenses has financial and regulatory consequences for the state. The lawsuit contends that because licensed casinos and mobile sportsbooks in New York are taxed by the state at a rate of approximately 51% of gross revenues, unlicensed prediction market platforms are not paying the same taxes. The complaint also asserts that the companies permit younger users, alleging that Coinbase and Gemini allow users as young as 18 even though New York law prohibits wagering by anyone under 21.
The legal dispute takes shape against a backdrop of other prediction-market cases involving state regulators and the federal Commodity Futures Trading Commission. Kalshi sued the New York Gaming Commission in October after the commission sought to bar Kalshi’s prediction market business from operating in the state, and in that case Kalshi argues that as a federally designated derivatives exchange it falls under the exclusive jurisdiction of the CFTC. Coinbase has advanced a similar line of argument in other states, according to the reporting, when it sued Connecticut, Michigan and Illinois to block their efforts to regulate its prediction business.
Other regulatory actions involving prediction markets have also been litigated. The CFTC sued Arizona, Connecticut and Illinois earlier this month to block them from policing prediction markets, and a federal judge last week halted Arizona’s regulatory efforts, finding the commission demonstrated a reasonable chance of success in arguing that federal law preempts Arizona’s approach.
The New York case arrives after James’ office issued a consumer alert earlier in the year warning that prediction markets operating without state Gaming Commission supervision could put New Yorkers at “significant financial risk.” The warning came amid lawsuits filed by some users who say they lost money on such platforms, according to reporting.
James has also been a subject of prediction market wagering herself. The suit’s broader narrative points to activity on Polymarket last year, which, during scrutiny of her real estate transactions by the Trump administration, showed $18,700 in trades on the question: “Will Letitia James be charged with a crime by December 31?” The same reporting says James was indicted in October but a judge dismissed the case a month later, concluding the prosecutor who brought the charges had been illegally appointed by the Justice Department, and James denied wrongdoing.
As of Tuesday, the reporting also described Kalshi activity tied to James, including trades on the outcome of this year’s election for New York attorney general, and said 93% of users were predicting she would win a third term.