New York Attorney General Letitia James filed lawsuits against Coinbase and Gemini on Tuesday, alleging the two cryptocurrency exchanges are running illegal gambling operations through their prediction market platforms, which launched in mid-December.
"Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James said in a statement.
The complaints, filed in Manhattan state court, allege both companies failed to secure the required licenses from the New York State Gaming Commission. The suit also claims the platforms allowed users aged 18 to 20 to place wagers, violating the state's minimum age of 21 for mobile sports betting.
The move intensifies a growing conflict between state authorities and federal regulators over who has the authority to oversee prediction markets. The lawsuit could set a significant legal precedent, increasing regulatory risk for operators and potentially slowing growth in the burgeoning sector.
The New York lawsuit is the latest front in a national battle for regulatory control. On April 2, the U.S. Commodity Futures Trading Commission (CFTC) sued three states—Arizona, Connecticut, and Illinois—to block them from regulating prediction markets, claiming it has "exclusive regulatory authority" over such commodity derivative markets.
This federal position was bolstered just four days later when an appeals court in Philadelphia sided with prediction market operator Kalshi, ruling the CFTC had exclusive oversight for its event contracts. The CFTC's argument, which is echoed by industry players, is that these platforms function more like financial exchanges matching buyers and sellers than traditional sportsbooks that take on risk as "the house."
The industry has been preparing for this fight, with lobbying spending hitting a record $1.84 million in the first quarter of 2026, a 60 percent increase from the previous year, according to lobbying disclosures. However, the direct legal challenge in a major market like New York is already having a chilling effect.
In a related market on the Predict.fun platform, the odds of its fully diluted valuation (FDV) exceeding $50 million within a day of launch were slashed in half over the past week, falling from 30 percent to just 15 percent. This indicates that traders are now pricing in significant regulatory risk for new platform launches. The New York AG is seeking to recover all profits from the platforms, levy fines equal to triple those profits, and provide restitution to customers.
This article is for informational purposes only and does not constitute investment advice.
