New York Takes Legal Action Against Coinbase and Gemini Over Prediction Markets

New York has filed lawsuits against two major crypto platforms, Coinbase and Gemini, arguing that their prediction markets—where users bet on sports, entertainment, and elections—are actually illegal gambling under state law. The state claims these markets operate like unlicensed bookmakers, with ads that encourage betting and contracts structured like wagers. Unlike traditional gambling, these platforms allow users as young as 18 to participate, even though New York bans mobile betting for those under 21. This isn’t an isolated issue. Several states, including Nevada and Washington, have already taken similar legal action against prediction markets, arguing that sports-related bets should be regulated as gambling, not financial products. The debate has reached federal courts, with appeals pending and a possible Supreme Court showdown looming. The Commodity Futures Trading Commission (CFTC) has jumped into the fray, claiming authority over these markets and suing states that try to block them.Coinbase insists their prediction markets are federally regulated exchanges, not gambling sites. The company’s legal team argues that users trade contracts based on future events, not place bets. Meanwhile, another major player, Kalshi, preemptively sued New York last year to argue that state gambling laws don’t apply to their platform—a case still unresolved. The New York Attorney General didn’t mince words, calling Coinbase and Gemini’s operations "illegal gambling" that flouts state regulations. The core question remains: Should prediction markets be treated as financial tools or gambling? The outcome could reshape how these platforms operate—and whether states or federal agencies get the final say.