{"id":71594,"date":"2026-04-24T07:18:38","date_gmt":"2026-04-24T07:18:38","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/new-york-sues-coinbase-and-gemini-over-prediction-markets\/"},"modified":"2026-04-24T07:18:38","modified_gmt":"2026-04-24T07:18:38","slug":"new-york-sues-coinbase-and-gemini-over-prediction-markets","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/new-york-sues-coinbase-and-gemini-over-prediction-markets\/","title":{"rendered":"New York Sues Coinbase and Gemini Over ‘Prediction Markets’"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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The following opinion editorial was written by Alex Forehand<\/a> and Michael Handelsman<\/a> for Kelman.Law<\/a>.<\/h5>\n

New York Sues Coinbase and Gemini<\/span><\/h2>\n

New York has escalated its enforcement posture against crypto<\/span> platforms\u2014this time <\/span>targeting so-called prediction markets<\/span>.<\/p>\n

On April 21, 2026, the New York Attorney General filed lawsuits against Coinbase Financial Markets<\/a> and Gemini Titan<\/a>, alleging that their event-based trading platforms constitute illegal gambling under state law.<\/p>\n

These platforms allow users to trade on the outcome of real-world events\u2014elections, sports, and economic indicators\u2014through \u201cyes\/no\u201d style contracts. The state\u2019s position is blunt: each of these contracts is effectively a bet.<\/span><\/p>\n

Gambling By Another Name<\/span><\/i><\/h3>\n

The lawsuits center on a straightforward theory: If users are staking<\/span> money on outcomes outside their control, the activity is gambling\u2014regardless of whether it is framed as \u201ctrading.\u201d<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

In other words, the state is not trying to regulate these products in a new manner. Rather, it is trying to recharacterize them entirely and fit them into a preexisting framework. Coinbase\u2019s Chief Legal Officer, Paul Grewal, has <\/span>stated<\/span><\/a> that they will continue to push for federal oversight under the CTFC, rather than the state, for prediction markets<\/span>. <\/span><\/p>\n

The Bigger Fight: State v. Federal<\/span><\/i><\/h3>\n

As Grewal hinted, this case is not really about prediction markets<\/span>\u2014it is about who gets to control them.<\/span><\/p>\n

On one side are the platforms, backed by a growing chorus of industry lawyers and former regulators, arguing that these products fall squarely within the jurisdiction of the Commodity Futures Trading Commission and <\/span>existing frameworks<\/span><\/a>. The theory is straightforward: event-based contracts are derivatives, and derivatives are federally regulated. <\/span><\/p>\n

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 \u201cgambling\u201d is not just incorrect\u2014it is preempted. In that view, allowing 50 different state regimes to redefine federally regulated products would fracture markets and undermine uniform oversight.<\/span><\/p>\n

On the other side, states\u2014led here by Letitia James\u2014are 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.<\/span><\/p>\n

What makes this clash particularly consequential is that both sides are, in different ways, right\u2014and the law has not yet cleanly resolved the overlap. Federal courts have, at times, signaled that the CFTC\u2019s 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.<\/span><\/p>\n

The result is a high-stakes jurisdictional collision. If the federal view prevails, prediction markets<\/a> may consolidate under a single regulatory framework, with clearer pathways to compliance and expansion. If the states succeed, the same product could be lawful in one jurisdiction and prohibited in another, with retroactive liability layered on top.<\/span><\/p>\n

This case is poised to force that question into the open\u2014and whatever answer emerges will shape not just prediction markets<\/a>, but the broader boundary between financial innovation and state enforcement power.<\/span><\/p>\n

The Cost of (Alleged) Noncompliance<\/span><\/i><\/h3>\n

The relief sought is sweeping\u2014and 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.<\/span><\/p>\n

But the most striking exposure lies in the state\u2019s demand for statutory penalties of $100,000 per offer or attempted offer of sports wagering. If interpreted to include each individual wager, the liability is astronomical. For reference, the Office of the Attorney General alone <\/span>alle<\/span>ges<\/a> to have placed 22,000 bets on Coinbase. While it is unclear if the state\u2019s wagers would be included in the penalty count, that number teases just the surface of sums Coinbase and Gemini face.<\/p>\n

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\u2014and ultimately claw back\u2014the entire market.<\/p>\n

What to Do If You Lost Money<\/span><\/i><\/h3>\n

If you participated in these prediction markets<\/a> and incurred losses, this may directly affect your rights. If you lost money on Coinbase or Gemini\u2019s prediction markets<\/a>, reach out to Kelman PLLC for a <\/span>free consultation<\/span><\/a>.<\/span> These cases often move quickly once enforcement begins, and early positioning matters\u2014especially where recovery pools or negotiated resolutions are involved.<\/span><\/p>\n

This article originally appeared at Kelman.law.<\/span><\/a><\/p>\n<\/div>\n