New York Attorney General Accuses Coinbase and Gemini of Running Illegal Gambling Operations Through Prediction Markets

(AsiaGameHub) –   New York Attorney General Letitia James has initiated legal action against Coinbase and Gemini, accusing the firms of operating illegal gambling via their prediction market services.

The two companies have recently launched markets that allow trading on the outcomes of sporting events, elections, and awards shows.

James stated that “these prediction market platforms meet the legal criteria for gambling in New York” because the results are unpredictable, beyond a participant’s influence, or dependent on chance.

These activities are being conducted without the required gambling licenses. The state’s gambling industry is tightly controlled, with just nine authorized sportsbooks.

“Calling it something else doesn’t change what it is; gambling by any other name is still gambling,” James remarked in a press release. “The prediction markets run by Gemini and Coinbase are simply unlicensed gambling businesses that lure young users to addictive sites without proper protections. We are acting to safeguard New Yorkers and prevent these platforms from breaking the law.”

Prediction Markets Encourage Underage Gambling

Beyond the licensing issue, James challenges the platforms’ policy of permitting users below the legal gambling age to engage. While the legal age for gambling in New York is 21, these prediction markets accept participants as young as 18.

The complaint warns that “Introducing minors to online gambling poses serious risks to their mental health and financial stability,” referencing National Institutes of Health data linking early gambling exposure to higher rates of depression, anxiety, mood disorders, and monetary problems.

This action follows a recent lawsuit James filed against Valve, contending that the video game company’s loot boxes also promote underage gambling.

The lawsuits further claim that Coinbase and Gemini break state law by permitting wagers on college sports games that include teams from New York, which is expressly forbidden.

James Wants Companies to Pay Back Profits

James also highlights that the companies are not paying taxes like licensed sportsbooks. New York imposes a 51% tax rate on gambling operators, the nation’s highest, which generated $1.32 billion in state tax revenue in the previous year.

To address the financial impact, James is seeking a court order for the companies “to disgorge all illicit earnings, provide restitution to affected consumers, and pay penalties amounting to three times the profits gained from their unlawful conduct.”

Multiple Legal Battles in NY Against Prediction Markets

Separate from the Attorney General’s lawsuits, the New York State Gaming Commission issued a cease-and-desist order to Kalshi last year. Kalshi subsequently filed a lawsuit against the regulator, which has temporarily halted enforcement pending the litigation’s outcome.

Kalshi and Polymarket are not defendants in the Attorney General’s current cases, but both are confronting class-action lawsuits in the state where users make parallel accusations of operating illegal gambling schemes.

State legislators have additionally proposed a bill that would explicitly ban prediction markets centered on sports, political outcomes, death, and war.