New York has launched a major lawsuit on crypto companies operating in the prediction markets. The lawsuit is led by Attorney General Letitia James, and she has sued Coinbase and Gemini over their prediction market platforms. The Officials claim that these platforms operate like illegal gambling services under the state law.
New York Attorney General General Letitia James, Source: Washington Time
The lawsuit argues that the companies allowed users to place bets on the outcomes of events relating to sports and elections without these platforms carrying out proper licensing from the New York State Gaming Commission. According to the state, what makes it worse is that these event-based contracts depend on chance and outcomes outside users’ control, making them no different from gambling.
The attorney general also raised her concerns about age restrictions. The platforms claims that it only allows users between 18 and 20 years old to participate, even though New York law requires users to be at least 21 for mobile sports betting.
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Coinbase has responded, saying that the prediction markets should fall under federal oversight. The company said that it believes the Commodity Futures Trading Commission (CFTC) has the authority to regulate such markets, not individual states.
Prediction markets have grown rapidly, especially after the 2024 U.S. presidential election, where they gained attention for accurately reflecting real-time probabilities. However, this growth has triggered regulatory tension. Some states want to treat these platforms as gambling, while federal regulators argue they are financial instruments similar to derivatives.
New York is now seeking heavy penalties. The state wants to recover alleged illegal profits, impose fines that could triple those amounts, and return money to affected users. It is also pushing for stricter rules, including banning underage users and limiting marketing efforts, especially on college campuses.
This lawsuit could shape the future of prediction markets in the U.S., determining whether they are treated as financial tools or illegal betting platforms.
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