By Hank Russell
New York Attorney General Letitia James today sued Coinbase Financial Markets, Inc. and Gemini, Titan LLC for illegally running gambling operations in New York through their prediction market platforms. The lawsuits were filed on April 21 in New York State Supreme Court in New York City.
Both Coinbase and Gemini — Delaware limited liability corporations headquartered in New York City — offer users the ability to bet on events, including sports, entertainment, and elections, in violation of New York laws, the lawsuits state. An investigation by the Office of the Attorney General (OAG) found that Coinbase and Gemini are running prediction markets that constitute illegal, unlicensed gambling operations. These illegal operations expose New Yorkers — including those under the legal gambling age of 21 — to serious financial and personal risk.
Coinbase and Gemini opened prediction markets available to New Yorkers over the age of 18. Prediction markets allow users to bet money on the outcome of a wide range of future events, from sports games to elections to award shows. 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.
The lawsuits contend that Coinbase and Gemini have failed to obtain a license from the New York State Gaming Commission, sidestepping their obligation to pay taxes like licensed casinos and mobile sports gambling platforms do. This tax revenue funds public schools, sports programs for underserved youth, and problem gambling education and treatment. Coinbase and Gemini’s prediction markets are also available to users between the ages of 18 and 20, even though New York law states that a person must be at least 21 years old to participate in mobile sports betting.
Exposing young people to online gambling can have damaging effects on their mental and financial well-being, James said. A recent study by the National Institutes of Health found that early exposure to gambling increases the likelihood of depression, anxiety, mood swings, and financial stress. Further, a study by the American Psychological Association found that 32% of those with a gambling disorder experience suicidal ideation.
James’ lawsuits also allege that Gemini and Coinbase are violating New York laws that forbid any betting on games in which New York college teams participate.
In her lawsuits, James is asking the court to require Coinbase and Gemini to forfeit illegal profits, distribute restitution to consumers who were harmed, and pay fines equal to three times the profits the companies made through their illegal actions.
In response, Coinbase’s chief legal officer, Paul Grewal, said in a statement, “About the [New York] lawsuit news — prediction markets are federally regulated national exchanges, registered with the CFTC [Commodity Futures Trading Commission]. This issue is proceeding in New York federal court as we speak. Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Long Island Life & Politics also reached out to Gemini, which did not respond as of press time.