New York Follows Washington’s Lead, Sues Coinbase and Gemini Over ‘Illegal Gambling’

• New York Attorney General Letitia James sued Coinbase and Gemini, alleging their prediction markets violate state gambling laws.
• The lawsuit claims “event contracts” function as betting products and allow participation by users under the legal age of 21.
• Shares of Coinbase and Gemini fell during trading, even as retail sentiment on Coinbase remained extremely bullish.

New York Attorney General Letitia James sued Coinbase (COIN) and Gemini (GEMI) on Tuesday, arguing that their prediction markets violate state gambling laws.

The lawsuit argues that "event contracts," which let users bet on outcomes such as sports games and elections, are essentially gambling because users have no control over the results, according to a Reuters report. It also reportedly alleged that the platforms improperly allowed participation by 18- to 20-year-olds, even though New York’s legal betting age is 21.

James has filed to recover alleged illegal profits and civil penalties of up to three times those profits, and to curb underage access and marketing practices, including promotions on college campuses.

Washington’s Lawsuit Against Kalshi

The move follows a lawsuit filed against Kalshi last month by Washington State Attorney General Nick Brown, who said its event-based contracts were akin to unregulated sports betting.

Kalshi ran an online sportsbook, letting users bet on real-world events like elections and sports, but labeled the activity "prediction markets" to dodge regulation, the complaint said.

Regulators declared the platform’s model fit the state’s broad definition of illegal online gambling under a 2006 law that largely bans the activity. The lawsuit also alleged that Kalshi promoted over-betting and targeted younger users. Kalshi has since sought to move the case to federal court, saying it was never warned ahead of time and is already fighting similar issues elsewhere. 

Coinbase and Gemini both entered the prediction market after partnering with Kalshi in December last year.

GEMI’s stock was down over 5% in afternoon trade. On Stocktwits, retail sentiment around GEMI dropped to ‘neutral’ from ‘bearish’ with chatter at ‘low’ levels over the past day.

Meanwhile, Coinbase’s stock was also trading down close to 7% during afternoon trading hours. On Stocktwits, it was the top trending at number seven, with retail sentiment around COIN in the ‘extremely bullish’ zone, while chatter around it remained ‘high’ over the past day.

Read also: Lawmaker Who Opposed CLARITY Act Unveils Bipartisan Bill For National Fintech, Crypto License

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