New York Attorney General Letitia James has filed suit against Coinbase and Gemini, accusing both companies of running illegal gambling operations through their prediction market platforms.
The lawsuit, filed in Manhattan, seeks to bar the exchanges from offering prediction markets in New York until they hold state gaming licenses — and frames the products not as financial instruments but as unregulated wagering.
“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James said. “Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations.
.@Gemini and @coinbase‘s so-called prediction markets are just illegal gambling operations that expose young people to addictive platforms.Gambling by another name is still gambling. I’m suing to stop these platforms from breaking the law.https://t.co/DosDKe2un1
— NY AG James (@NewYorkStateAG) April 21, 2026
A Direct Challenge to the CFTC
The suit is an explicit challenge to federal authority. The CFTC has asserted exclusive jurisdiction over prediction markets, treating event contracts as commodity derivatives. New York is ignoring that framing entirely and applying state gaming law directly.
This is the latest escalation in an ongoing jurisdictional conflict. Kalshi, which holds a CFTC Designated Contract Market license, is already fighting New York, Massachusetts, and Michigan in court over the same issue. Coinbase has preemptively sued Connecticut and Illinois to block state-level oversight of its prediction business.
The CFTC itself has sued Arizona to stop the state from policing these markets.
The New York action adds two of the most visible publicly listed companies in crypto to that list of defendants — and raises the political and financial stakes considerably.
What New York is Actually After
The lawsuit is partly about money. Licensed sportsbooks in New York pay roughly 51% of gross revenues in tax.Prediction market platforms operating under CFTC classification do not pay into that tax pool.
The state argues this is intentional, saying the “financial instrument” framing is used to avoid the legal and financial consequences of New York gambling law. The lawsuits seek forfeiture of profits, restitution to users, and penalties of up to three times the companies’ alleged gains.
Consumer protection is the other stated concern. The platforms currently allow users from age 18; New York gambling law sets the minimum at 21.
The fundamental question — whether an event contract is a derivative or a bet — is now heading to a New York courtroom.
For any brokerage, exchange, or fintech firm considering entering the U.S. prediction market space, the outcome matters: it will either confirm federal preemption or hand states a usable legal template to block these products regardless of CFTC oversight.
This article was written by Tanya Chepkova at www.financemagnates.com.
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