New York Sues Coinbase and Gemini Over ‘Prediction Markets’

These platforms allow users to trade on the outcome of real-world events—elections, sports, and economic indicators—through “yes/no” style contracts. The state’s position is blunt: each of these contracts is effectively a bet.

New York alleges the contracts are games of chance, as opposed to legitimate financial instruments, and the platforms therefore operated without appropriate licenses from the state gaming authority.

New York went on to emphasize that users as young as 18 were allowed to participate, despite the 21+ requirement for betting in the state.

Among the more prominent voices advancing this position is Mike Selig, who has argued that once a product qualifies as a derivative, state-level recharacterization as “gambling” is not just incorrect—it is preempted. In that view, allowing 50 different state regimes to redefine federally regulated products would fracture markets and undermine uniform oversight.

On the other side, states—led here by Letitia James—are advancing a far more aggressive theory of authority. Their position is that no amount of financial engineering can obscure what these products actually are: wagers on uncertain events. And if they are wagers, they fall within the traditional police powers of the states to regulate gambling, regardless of how they are labeled or structured. This is not simply a technical disagreement, but a direct challenge to the idea that federal commodities law occupies the field.

What makes this clash particularly consequential is that both sides are, in different ways, right—and the law has not yet cleanly resolved the overlap. Federal courts have, at times, signaled that the CFTC’s authority over derivatives is expansive. But states have long retained broad power to regulate gambling within their borders, and they are now testing just how far that power extends into crypto-native financial products.

The relief sought is sweeping—and potentially existential. New York is not merely seeking to halt these platforms, but unwind them. The complaint demands disgorgement of all profits, civil penalties of up to three times alleged gains, full restitution to users, and injunctive relief that could effectively shut down the business lines at issue.

The State has also gone a step further, seeking a full accounting from Coinbase and Gemini of their alleged gambling operations, including total bets placed, customer losses, and all revenues received. That request signals where this is heading: not just enforcement, but a detailed financial reconstruction designed to quantify—and ultimately claw back—the entire market.