New York's Attorney General, Letitia James, has initiated legal action against cryptocurrency exchanges Coinbase and Gemini, alleging that their prediction market platforms operate as illegal gambling ventures.
On Tuesday, James filed lawsuits in Manhattan's state court, claiming that the prediction markets of these two crypto giants violate state gambling laws by functioning without the necessary licenses.
The lawsuits aim to permanently prevent Coinbase and Gemini from conducting unlicensed gambling activities in New York. Additionally, they seek restitution, profit disgorgement, damages, and financial penalties.
In her statement, James emphasized that “gambling by another name is still gambling” and that such activities are subject to regulation under New York laws and its constitution.
She criticized the prediction markets, calling them illegal gambling operations that expose young people to addictive platforms lacking essential safeguards.
This legal action arises as state gaming authorities and attorneys general contend that prediction markets essentially act as online sportsbooks under a different guise. Meanwhile, a federally licensed sector, supported by the Trump administration, argues for clearer regulations from Washington.
Notably, the New York Attorney General's office is not merely echoing arguments made by other states. In a groundbreaking approach, the lawsuit references the federal Wire Act of 1961, which prohibits the transmission of sports betting information across state lines via wire communications.
According to gaming attorney Daniel Wallach, this marks the first instance in which a law enforcement agency has accused a prediction market of violating the Wire Act by offering sports contracts across state lines, potentially setting a significant precedent nationwide.
Federal appeals courts have maintained that the Wire Act applies to online sports betting. Unlike the Commodity Futures Trading Commission's stance that federal law supersedes state gaming laws, the Wire Act is a federal statute that cannot be easily dismissed.
The lawsuits claim that both Coinbase and Gemini have engaged in “repeated and persistent” illegal activities, showing “flagrant disregard” for New York’s constitution and penal laws.
Specific examples of sports wagers offered to users were included in the filings, highlighting the platforms' operations.
James pointed out that neither company possesses a license from the New York State Gaming Commission (NYSGC), meaning they do not contribute to the 51% gross-revenue tax that licensed sportsbooks are required to pay. This tax supports public education, problem gambling treatment, and sports initiatives for underprivileged youth.
Moreover, New York law mandates that bettors must be at least 21 years old, yet both Coinbase and Gemini allow users aged 18 to 20 to engage in sports-related markets.
Interestingly, Kalshi, the largest prediction market in the U.S., was not included in the lawsuit, having previously filed a preemptive lawsuit against the NYSGC in October 2025 in a federal court.