New York Attorney General Sues Coinbase and Gemini Over “Illegal” Prediction Markets

Letitia James has filed a lawsuit against Coinbase and Gemini, alleging the companies illegally offered prediction markets that function as unregulated gambling platforms.

In a statement, the New York Attorney General’s office said the firms violated state law by enabling users to bet on real-world events, including sports and elections, without complying with local gambling regulations. The state is seeking financial penalties, restitution, and the forfeiture of profits deemed незаконно obtained.

“Gambling by another name is still gambling,” James said, arguing that such platforms are not exempt from state oversight.

Multi-Billion Dollar Penalties Sought

According to court filings, New York is seeking at least $2.2 billion from Coinbase and $1.2 billion from Gemini. The complaint also raises concerns about consumer protection, particularly the accessibility of these platforms to users aged 18 to 21—below the legal threshold for mobile sports betting in New York.

The lawsuit frames prediction markets as lacking adequate safeguards and exposing younger users to high-risk, potentially addictive financial behavior.

Federal vs State Jurisdiction Clash

The case underscores an escalating regulatory conflict between U.S. federal and state authorities over the classification of prediction markets.

Commodity Futures Trading Commission (CFTC) has asserted that such markets fall under its exclusive jurisdiction as regulated derivatives platforms.

Paul Grewal responded publicly, stating that prediction markets are federally regulated and that the matter is already being addressed in federal court. “Coinbase will continue to fight for the federal oversight of these markets that Congress intended,” he said.

Platforms at the Center of the Dispute

Coinbase recently expanded into prediction markets through its integration with Kalshi, while Gemini entered the sector with its own platform, Gemini Titan, following regulatory clearance at the federal level.

However, state regulators argue that federal approval does not override local gambling laws—particularly when it comes to event-based betting such as sports outcomes.

Growing Legal Pressure on Prediction Markets

The legal battle reflects a broader trend of regulatory fragmentation in the U.S., where overlapping authorities are increasingly testing the boundaries of crypto-adjacent financial products.

Earlier this month, the CFTC itself initiated legal action against multiple states, including Illinois, Arizona, and Connecticut, over attempts to restrict federally regulated prediction markets—further intensifying the jurisdictional dispute.

As courts begin to weigh in, the outcome of these cases could define whether prediction markets are treated as financial instruments or gambling products, with significant implications for crypto platforms operating at the intersection of both.