New York Attorney General Letitia James sued subsidiaries of two major crypto exchanges on Tuesday, accusing them of running unlicensed prediction markets that amount to illegal gambling under state law.
What happened
- The lawsuit, filed in Manhattan state court and reviewed by Reuters, targets Coinbase Financial Markets and Gemini Titan — units of Coinbase and Gemini — alleging they failed to obtain required licenses from the New York State Gaming Commission.
- James says the platforms’ “prediction markets” produce outcomes that are outside users’ control or function like games of chance, putting them squarely within New York’s legal definition of gambling.
- The complaint also alleges the firms allowed 18- to 20-year-olds to participate, despite New York’s 21-year minimum for mobile sports wagering.
Why it matters
- James framed the case as a regulatory enforcement issue: “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution.”
- The lawsuit seeks disgorgement of alleged illegal profits, civil penalties equal to three times those profits, restitution for customers, and injunctions preventing under-21s from wagering. It also asks the court to limit how the platforms can market their services, including a proposed ban on promotion on college campuses.
Market reaction and next steps
- Neither Coinbase nor Gemini executives had publicly responded at the time Reuters reviewed the filings. The news hit markets: Coinbase’s COIN shares fell about 10% to near $200, while GEMI dropped roughly 4% to below $5.
- The case could have broader implications for crypto firms offering prediction-style contracts in U.S. states with strict gambling definitions and licensing regimes.
Background (brief)
- Prediction markets let users take positions on the outcome of events (e.g., election results, sports outcomes, or price movements). Regulators have increasingly scrutinized such products where they resemble betting rather than financial markets.
The lawsuit marks a notable enforcement move in a regulatory environment that has otherwise warmed to crypto in parts of the U.S., and it may prompt other states or federal agencies to reevaluate similar offerings.
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