NYS sues prediction platforms over gambling allegations

A pair of prediction market platforms are violating state gaming laws by offering New Yorkers the chance to make bets on sports contests, elections and other events, New York Attorney General Letitia James said Tuesday.

Coinbase Financial Markets, Inc. and Gemini Titan LLC, two prediction market corporations headquartered in Manhattan, allow users to buy into event "contracts" regarding future events, from award show winners to nominees for political races.

"Because the outcomes of these events are uncertain and outside the control of the bettor, or hinge on a game of chance, these prediction market platforms fit the legal definition of gambling in New York," James said in a news release announcing lawsuits against both corporations.

James is asking a state court in Manhattan to force Coinbase and Gemini to stop their online prediction market operations in New York, pay three times the profits they earned in fines and provide restitution to customers, according to the lawsuits.

Both companies also illegally allow adults under 21 to engage in mobile sports wagering, the lawsuits said. Neither corporation has ever been licensed to operate by the New York State Gaming Commission, despite engaging in activities James described as gambling.

"Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution," James said. "Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails."

By failing to seek a license from the gaming commission, both Coinbase and Gemini are also "sidestepping their obligation to pay taxes like licensed casinos and mobile sports gambling platforms do," James said.

Prediction markets are "federally regulated national exchanges" registered with the U.S. Commodity Futures Trading Commission, Coinbase chief legal officer Paul Grewal said in a statement emailed to Newsday via a spokesperson.

"This issue is proceeding in New York federal court as we speak," Grewal added. "Coinbase will continue to fight for the federal oversight of these markets that Congress intended."

A spokesperson for Gemini did not immediately respond to an emailed request for comment.

Prediction markets pose "serious financial and personal risk" to New Yorkers, including those too young to legally place bets, James said. Mobile sports gambling has become an increasing concern among teens and young adults, Newsday previously reported.