New York has filed a major lawsuit against Coinbase and Gemini, accusing both firms of running illegal prediction market platforms that violate state gambling laws.
Key Takeaways
- New York Attorney General has sued Coinbase and Gemini over alleged illegal prediction markets.
- The state is seeking at least $3.4 billion in penalties and restitution.
- Regulators claim the platforms allowed users under 21 to participate.
- The case highlights a growing conflict between state and federal oversight of prediction markets.
What Happened?
The New York Attorney General has launched legal action against crypto-linked platforms operated by Coinbase and Gemini, alleging that their prediction markets function as unlicensed gambling systems. The lawsuits claim these platforms allowed users to bet on events like sports and elections without proper regulatory approval.
🚨JUST IN: NEW YORK SUES COINBASE AND GEMINI
— Coin Bureau (@coinbureau) April 21, 2026
New York has filed lawsuits against Coinbase and Gemini for alleged violations of state law, according to court records cited by Reuters. pic.twitter.com/WMKef1lMTn
New York Takes Aim at Prediction Markets
Letitia James has filed lawsuits against Coinbase and Gemini, marking one of the most aggressive state level crackdowns on prediction markets to date. The complaints were filed in Manhattan state court and target Coinbase Financial Markets and Gemini Titan.
According to the filings, both companies failed to secure licenses from the New York State Gaming Commission. Authorities argue that the platforms allowed users to trade on outcomes tied to uncertain real world events such as elections and sports results.
James stated:
Why Regulators Say This Is Gambling?
State regulators claim that prediction markets meet the legal definition of gambling because outcomes depend on chance or external events beyond the control of participants. This places them in the same category as traditional betting systems under New York law.
The lawsuits highlight several concerns:
- Event based contracts depend on unpredictable outcomes.
- Platforms allegedly operated without required licenses.
- Access was reportedly available to users aged 18 to 20.
New York law requires users to be at least 21 years old to participate in mobile sports betting, making this a key issue in the case.
Billions at Stake in Penalties
The financial stakes are significant. Court documents show that New York is seeking:
- At least $2.2 billion from Coinbase.
- Around $1.2 billion from Gemini.
- Additional civil fines that could reach three times alleged illegal profits.
The state is also pushing for customer restitution and stricter controls, including banning underage access and limiting marketing efforts, especially on college campuses.
Federal vs State Regulatory Clash
The lawsuits come at a time of growing tension between state authorities and federal regulators over who controls prediction markets.
Coinbase has pushed back, arguing that these markets fall under federal oversight. The company points to its partnership with Kalshi, a platform regulated by the Commodity Futures Trading Commission. Coinbase Chief Legal Officer Paul Grewal stated that prediction markets are federally regulated and confirmed the issue is already being addressed in federal court.
Meanwhile, federal regulators have previously asserted that event based contracts fall under their exclusive jurisdiction. However, states like New York continue to enforce their own gambling laws, especially when platforms involve sports related outcomes.
This ongoing legal conflict has created uncertainty across the industry, with courts now playing a central role in deciding how prediction markets should be regulated in the United States.
CoinLaw’s Takeaway
In my experience, this case could become a turning point for prediction markets in the US. I found that regulators are no longer treating these platforms as a gray area. They are clearly moving to classify them as gambling when state laws apply.
What stands out to me is the scale of the penalties. Billions in potential fines send a strong message to any company entering this space. At the same time, the clash between state and federal authority creates real confusion. I believe this will ultimately force clearer rules, but until then, companies are operating in a high risk environment.
