New York Attorney General Letitia James filed twin lawsuits in Manhattan Supreme Court on April 21 accusing Coinbase Financial Markets and Gemini Titan of running illegal gambling operations through their prediction market platforms. The suits mark the most aggressive state-level action yet against event contract trading, and they arrived the same day Coinbase shares slid roughly 6% on the news.
James is seeking disgorgement of illegal profits, civil penalties equal to three times those profits, restitution to affected customers, and court orders blocking both platforms from serving users under 21 or marketing on college campuses. The filing accuses both companies of violating roughly half a dozen state laws.
What the Complaint Actually Alleges
The core argument is that prediction markets are gambling under New York law because outcomes fall outside bettors’ control or turn on chance. Both exchanges let users wager on sporting events, elections, award shows, and entertainment outcomes. The complaint cites specific examples including bets on whether the New York Knicks would win by more than 6.5 points, who would take the February 8, 2026 Super Bowl, and the February 14 college basketball game between St. John’s and Providence.
Neither Coinbase nor Gemini holds a license from the New York State Gaming Commission, which James argues puts them outside the regulatory framework that governs licensed casinos and mobile sports betting operators. That framework includes tax obligations that fund public schools, youth sports programs, and problem gambling treatment. Both platforms launched their prediction markets in mid-December 2025 and operate across all 50 states.
A second pillar of the complaint is age access. New York law sets a minimum age of 21 for mobile sports betting, but both platforms allow users aged 18 to 20 to trade event contracts. James cited research from the National Institutes of Health and the American Psychological Association linking early gambling exposure to depression, anxiety, and suicidal ideation among those who develop gambling disorders.
Coinbase Pushes Back on Federal Preemption
Coinbase Chief Legal Officer Paul Grewal responded within hours on X, arguing that prediction markets are federally regulated national exchanges registered with the Commodity Futures Trading Commission. Grewal said the issue is already being litigated in New York federal court and that Coinbase will continue to press for federal oversight.
The legal question of whether federal commodities law preempts state gambling statutes is the fight defining this entire sector. On April 6, the Third Circuit sided with Kalshi against New Jersey, ruling the Commodity Exchange Act preempts state gambling law. The Ninth Circuit heard Nevada’s appeal on April 20, with judges reportedly signaling they may rule the other way. A circuit split would push the question toward the Supreme Court.
Gemini had not responded publicly at the time of filing. Both companies face a complaint that does not hinge on whether prediction markets are socially useful but on whether state licensing regimes still apply when a product is also a CFTC-registered contract.
A Growing Wall of State Pushback
New York joins a growing list of states moving against prediction market operators. Nevada, Washington, Illinois, Connecticut, Michigan, and Massachusetts have all taken enforcement or regulatory action against similar platforms over the past year. The CFTC countered on April 2 by suing Arizona, Connecticut, and Illinois to stop them from regulating event contracts directly, setting up a jurisdictional collision that neither side has fully resolved.
The timing is awkward for Coinbase. The company just reported quarterly numbers, and prediction markets were pitched to investors as one of the growth levers carrying the business beyond spot trading. Kalshi and Polymarket, the two largest pure-play prediction market operators, are now preparing to launch crypto perpetual futures, a move that will deepen the category’s collision with both derivatives regulation and state gambling law.
For users, the immediate impact is uncertainty. New Yorkers who currently trade event contracts on either platform face the possibility that their accounts could be restricted if the state secures an injunction. Whether the federal preemption argument holds in state court is the variable that determines how far this case can actually reach.
