Key Takeaways
Contents
- Attorney General Letitia James has initiated legal proceedings against Coinbase and Gemini, characterizing their prediction market services as unlawful gambling ventures
- Both lawsuits demand cessation of operations in New York state and seek recovery of earnings, compensation, and monetary sanctions
- For the first time in such litigation, the federal Wire Act of 1961 has been cited against a prediction market operator
- Kalshi avoided being named in these legal actions due to its ongoing federal litigation challenging New York authorities
- Coinbase filed a motion to move proceedings to federal jurisdiction, contending that federal statutes supersede state gambling regulations
On Tuesday, New York’s top legal official, Attorney General Letitia James, initiated legal action against two prominent cryptocurrency platforms, Coinbase and Gemini. The lawsuits claim both exchanges are operating unlawful gambling enterprises via their prediction market offerings.
The legal filings were submitted to a state court in Manhattan. They demand permanent injunctions preventing both organizations from conducting unlicensed gambling activities within New York’s borders.
The complaints request restitution for affected parties, forfeiture of illegally obtained revenues, compensatory damages, and substantial financial sanctions. James stated that “gambling by another name is still gambling.”
She maintained that the prediction market services provided by these companies amount to “just illegal gambling operations.” She further noted that such platforms create exposure for younger individuals to potentially addictive services without adequate protective measures.
Invoking the Wire Act
The Attorney General’s legal team introduced a novel strategy in this regulatory dispute. Gaming law expert Daniel Wallach noted that the lawsuit appears to be the first instance where the federal Wire Act of 1961 has been applied against a prediction market platform.
The Wire Act prohibits the use of wire-based communications for transmitting wagers on sporting competitions across state boundaries. Multiple federal appellate courts have confirmed that this statute encompasses online sports wagering activities.
This legal strategy carries significance because prediction market operators have previously claimed federal law authorizes their business models. However, the Wire Act itself represents federal legislation, which undermines arguments based solely on federal preemption.
The legal complaints accuse Coinbase and Gemini of “repeated and persistent” violations of the law. The documents assert that these platforms provide “what is quintessentially wagering” according to New York’s legal framework.
Neither platform possesses authorization from the New York State Gaming Commission. Consequently, they avoid paying the 51% gross-revenue levy that authorized sportsbook operators must remit.
Those tax revenues support public education initiatives, problem gambling intervention programs, and youth athletic activities. New York regulations also mandate that bettors must be at minimum 21 years old, yet both platforms permit users between 18 and 20 to participate in sports-related wagering.
The Kalshi Exception
Kalshi, which operates the nation’s largest prediction market, was notably absent from these legal actions. The platform took preemptive legal measures by suing the New York State Gaming Commission in October 2025.
Kalshi petitioned a federal court to determine that state gambling statutes cannot be applied to a contract market registered with the CFTC. A request to prevent the Attorney General’s office from pursuing legal action against Kalshi remains under judicial consideration.
The CFTC has actively defended prediction markets at the federal regulatory level. In April, the commission filed suit against Arizona, Connecticut, and Illinois to prevent those jurisdictions from applying gambling statutes to CFTC-supervised platforms.
New York’s legal strategy mirrors tactics initially deployed by Massachusetts. Rather than awaiting federal court challenges, both states initiated proceedings in state courts to place platforms in a reactive legal position.
Arizona escalated enforcement by filing criminal charges against Kalshi in March. The state alleged the platform was conducting an illegal gambling enterprise.
Currently, more than ten states are engaged in active legal disputes concerning prediction markets.
Coinbase issued a swift response to the legal challenge. Chief Legal Officer Paul Grewal announced on X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Coinbase subsequently requested transfer of the proceedings to federal court. Grewal contended that the Commodity Exchange Act completely supersedes state gambling legislation.
The platform had already initiated preemptive legal actions in Connecticut, Michigan, and Illinois during December 2025. The legal professionals representing New York in the case against Gemini previously served as CFTC trial lawyers and directed the federal commission’s 2022 enforcement action against Gemini concerning bitcoin futures market manipulation allegations.
Gemini resolved that prior matter in January 2025 by remitting $5 million while not acknowledging wrongdoing. Congressional legislation could settle the jurisdictional dispute, but judicial resolution is anticipated to proceed more rapidly than legislative action.
