NEW YORK (AP) \u2014 New York is suing Coinbase and Gemini, two of the newest players in the prediction market industry, arguing that the companies\u2019 unregulated and unlicensed platforms are illegal gambling operations.<\/p>\n
Attorney General Letitia James\u2019 lawsuit, filed Tuesday in state court in Manhattan, seeks to bar the companies\u2019 platforms from operating in the state unless and until they obtain licenses from the state Gaming Commission.<\/p>\n
\u201cGambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,\u201d James said in a statement. \u201cGemini and Coinbase\u2019s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.\u201d <\/p>\n
Messages seeking comment were left for Coinbase and Gemini. Both companies began as cryptocurrency trading platforms before branching into the prediction space, which has been dominated by Kalshi and Polymarket.<\/p>\n
Gemini, founded by brothers Cameron and Tyler Winklevoss, launched Gemini Predictions in December. Coinbase started its prediction markets service in January.<\/p>\n
\u201cCrypto was just the beginning,\u201d Gemini\u2019s website said Tuesday, next to a prediction box offering bets on such things as the winner of that day\u2019s Chelsea-Brighton Premier League soccer match, when Kevin Warsh will be confirmed as the chairman of the Federal Reserve, and what the price of oil will be Friday.<\/p>\n
New York\u2019s lawsuit alleges that the Coinbase and Gemini are seeking \u201cto avoid the legal and financial consequences\u201d of the state\u2019s close regulation of gambling \u201cby offering what is quintessentially wagering under the guise of offering \u2018event contracts\u2019 on a \u2018prediction market.\u2019\u201d<\/p>\n
By operating without licenses, the lawsuit says, Coinbase\u2019s and Gemini\u2019s prediction market businesses aren\u2019t paying the same taxes as licensed casinos and mobile sportsbooks, which are taxed by the state at a rate of approximately 51% of gross revenues. In addition, the lawsuit says, Coinbase and Gemini allow users as young as 18, while state law prohibits wagering by anyone under 21. <\/p>\n
Kalshi sued the state Gaming Commission in October after the commission sought to bar the company\u2019s prediction market business from operating in the state. In the case, which is ongoing, Kalshi argues that, as a federally designated derivatives exchange, it is subject to the exclusive jurisdiction of the federal regulator, the Commodity Futures Trading Commission.<\/p>\n
Coinbase made the same argument in December when it sued Connecticut, Michigan and Illinois to block those states from attempting to regulate its prediction business. Earlier this month, the Commodity Futures Trading Commission sued Arizona, Connecticut, and Illinois to block them from policing prediction markets.<\/p>\n