- Key insight: James' lawsuits are the latest in a series of recent cases regarding the regulation of prediction markets in the United States.
- What's at stake: Prediction markets are currently earning millions of dollars in revenue from sports-related event contracts, which impacts the taxes state gambling agencies collect from licensed sportsbook agencies.
- Forward look: Coinbase filed a notice of removal of its case from the NY state court to a federal district court in response to the initial filing.
New York Attorney General Letitia James is suing crypto exchanges Coinbase and Gemini for allegedly running illegal sports betting operations in the state through their prediction market offerings.
James filed a pair of lawsuits to the Supreme Court of the State of New York on Tuesday against Coinbase Financial Markets and Gemini Titan LLC. She alleged in the filings that both Coinbase and Gemini offer users the ability to bet on events, including sports, entertainment and elections, in violation of New York gambling laws.
As investment companies like Goldman Sachs and Robinhood express interest, or have already begun investments, in prediction market products, the matter of who regulates these events contracts is actively being contested across state and federal courts.
"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. "Gemini and Coinbase's so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails. My office is taking action to protect New Yorkers and stop these platforms from violating the law."
She also stated that under New York state law, a person must be at least 21 years old to participate in mobile sports betting, and Coinbase and Gemini opened prediction markets to New Yorkers over the age of 18.
In the filings, James asked the New York State Supreme Court to require Coinbase and Gemini to forfeit illegal profits, distribute restitution to consumers who were harmed and pay fines equal to three times the companies' profits from the operations in question.
Coinbase Chief Legal Officer Paul Grewal responded to the lawsuit in a post on X, saying that prediction markets are federally regulated national exchanges registered with the CFTC.
"This issue is proceeding in New York federal court as we speak," Grewal said. "Coinbase will continue to fight for the federal oversight of these markets that Congress intended."
In October 2025, Kalshi sued the New York State Gaming Commission in a New York federal district court to preemptively block any effort to ban its event contracts in the state. That case remains pending.
On Wednesday, Grewal issued a second statement announcing that Coinbase filed a notice of removal from the New York State Supreme Court to the United States District Court for the Southern District of New York. A removal is a procedural response by the defendant to move a case from a state court to a federal court.
"New York's claims necessarily raise disputed and substantial questions of federal law," Grewal said in an X post regarding the removal. "They are subject to complete preemption. And New York cannot defeat federal-officer removal through artful pleading."
Gemini Titan did not respond to a request for comment in time for publication.
Coinbase originally received CFTC registration as a futures commission merchant in 2023, then officially
Sports-related prediction contracts are particularly of concern for state gambling agencies, such as the New York State Gaming Commission, because they collect tax revenue from companies registered with them to operate sports bets.
Over the last year, prediction markets have become a significant competitor to traditional sportsbooks for revenue and market share even as they currently operate with federal CFTC registrations but not state-level licenses.
According to private markets research firm Sacra, sports accounted for
Similarly, Polymarket recorded
On April 16, CFTC chairman Michael Selig said in his first public congressional testimony since his December 2025 confirmation that his agency is "working to provide explicit guidelines and further strengthen investor protections for prediction markets, which offer trading in event contract derivatives that are regulated under the exclusive jurisdiction of the CFTC."
The Justice Department and the CFTC also jointly filed three lawsuits earlier this month against Illinois, Arizona and Connecticut for their pending cases against CFTC-registered prediction markets such as Kalshi. State-level lawsuits against prediction market platforms have alleged that sports-related predictions are a form of sports gambling, which has been regulated by state sportsbook agencies since the Supreme Court overturned a federal ban on sports gambling in 2018.
In the lawsuits, the CFTC argued that it has exclusive jurisdiction to regulate sports-related wagers on popular prediction market platforms, including Polymarket and Kalshi.
"This is not the first time states have tried to impose inconsistent and contrary obligations on market participants, but Congress specifically rejected such a fragmented patchwork of state regulations because it resulted in poorer consumer protection and increased risk of fraud and manipulation," Selig said in a statement at the time.
