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Introduction: when event contracts meet state law
On April 21, 2026, New York Attorney General Letitia James filed lawsuits against two of the most prominent names in cryptocurrency and financial technology, Coinbase Financial Markets and Gemini Titan. The charge? Operating illegal gambling platforms under the guise of prediction markets.
The complaints, filed in a state court in Manhattan, allege that both companies have been allowing users to trade on the outcomes of real-world events, from sports results to elections, without obtaining the proper licenses from the New York State Gaming Commission. James summed up her position plainly: "Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution."
This is not just a story about two companies facing a lawsuit. It is a story about the collision of financial innovation, regulatory authority, and the fundamental question of what gambling actually is in the digital age.
What are prediction markets?
Prediction markets are platforms where users buy and sell contracts based on the likelihood of future events. Think of it like a stock market, but instead of trading shares in a company, you are trading on whether a sports team wins, which candidate claims election victory, or whether a particular economic event occurs. The price of each contract reflects the collective belief of all traders about the probability of that outcome.
These markets have existed for decades in academic forms, but the new generation of platforms, including offerings from Coinbase and Gemini, have taken them mainstream, making them accessible to everyday retail users across all 50 US states.
The real turning point came with the 2024 US presidential election. Prediction markets proved remarkably accurate in forecasting Donald Trump's victory over Kamala Harris, often more accurate than traditional polling. That moment put prediction markets firmly on the map for millions of Americans. Since then, participation has surged, and both Coinbase and Gemini launched their products in mid-December 2024.
The lawsuits: what is New York alleging?
The complaints filed by James are detailed and multi-pronged. Here is a breakdown of the core allegations.
No proper licensing
At the heart of both lawsuits is a straightforward claim: Coinbase and Gemini did not obtain the required licenses from the New York State Gaming Commission before operating their prediction markets. New York has a well-established regulatory framework for gambling, and operating without proper licenses is illegal under state law.
Event contracts called quintessentially gambling
The complaints describe both companies' event contracts as quintessentially gambling because event outcomes are entirely outside the control of the user. Whether a team wins a game or a candidate wins an election has nothing to do with any skill or decision a user makes after placing their trade. That, the AG argues, is the textbook definition of gambling, regardless of how the platforms brand or market their products.
Allowing underage users to wager
New York State law sets the minimum age for mobile sports betting at 21. James alleges that both Coinbase and Gemini have been permitting users between the ages of 18 and 20 to participate, a direct violation of state law and a sign, in the AG's view, of deliberate disregard for consumer protection rules.
Marketing on college campuses
Beyond the age issue, James is also seeking a ban on both platforms marketing their services on college campuses, pointing to concerns about targeting financially inexperienced young users with real-money risk products.
What is New York seeking?
The remedies sought by James are substantial:
- Full restitution to customers who participated in the platforms' prediction markets
- Civil fines equal to triple the illegal profits earned by Coinbase and Gemini
- A permanent ban on users under 21 participating in either platform's prediction markets
- A prohibition on marketing either platform's services on college campuses
Triple damages combined with restitution could amount to enormous sums, given that both platforms have been operating across all 50 states since December 2024.
The bigger battle: who actually regulates prediction markets?
This is where the story becomes genuinely complex, and where New York's lawsuit faces real legal headwinds.
The CFTC's claim to exclusive authority
The US Commodity Futures Trading Commission (CFTC) does not agree that state gaming laws apply here. On April 2, 2026, the CFTC itself filed suit against Arizona, Connecticut, and Illinois, seeking to stop those states from regulating prediction markets. The CFTC argues that prediction markets are commodity derivative contracts and that it holds exclusive regulatory authority over commodity derivatives under federal law. State gaming regulators, therefore, have no jurisdiction.
Federal courts are siding with platforms
Courts have begun weighing in, and early rulings have not favored state regulators. On April 6, 2026, the federal appeals court in Philadelphia ruled in favor of Kalshi, a competing prediction market platform, finding that the CFTC has exclusive oversight over its sports-related event contracts and that New Jersey gaming regulators could not ban them. This ruling is directly relevant to the New York lawsuits and could prove a significant obstacle to James's legal strategy.
Kalshi also filed a preemptive lawsuit against the New York State Gaming Commission in October 2025, seeking to block any effort to ban its event contracts in New York. That case remains pending in Manhattan federal court.
A three-front regulatory war
What has emerged is a chaotic three-front battle: state attorneys general asserting these are gambling products under state law; the CFTC asserting exclusive federal authority as commodity derivatives; and federal courts being asked to referee. The platforms are largely caught in the middle, though they are actively litigating to support the federal framework.
Who are the companies involved?
Coinbase Financial Markets is a subsidiary of Coinbase (COIN), one of the largest cryptocurrency exchanges in the United States. The prediction market product is part of Coinbase's broader push to expand beyond crypto trading and into regulated financial products.
Gemini Titan is a product of Gemini Space Station, founded by the billionaire twins Tyler and Cameron Winklevoss, Tyler as CEO and Cameron as president. Gemini has long positioned regulatory compliance as a core differentiator, making this lawsuit particularly notable given the company's New York roots and history of engaging proactively with regulators.
Neither Coinbase nor Gemini responded to requests for comment at the time of filing.
What this means for the industry
The New York lawsuits arrive at a pivotal moment. Prediction markets have gone from a niche academic tool to a mainstream financial product in just a couple of years, and regulators are scrambling to catch up.
If New York succeeds, it could set a precedent that emboldens other states to impose their own gambling regulations on prediction market platforms, creating a fragmented, state-by-state compliance burden that could effectively shut down or severely limit these products in large parts of the country.
If the CFTC's position ultimately prevails, as early court rulings suggest it might, prediction markets could operate under a single, unified federal framework. That outcome would be a major win for the platforms and for the broader fintech and crypto sectors that have been pushing for regulatory clarity.
Either way, the legal battles playing out in 2026 will define the future of prediction markets in the United States. For investors, traders, and anyone interested in the intersection of technology, finance, and law, this is one of the most consequential regulatory fights of the year.
Bottom line
New York says prediction markets are gambling. The CFTC says they are federally regulated financial products. The courts are starting to agree with the CFTC. Coinbase and Gemini now face significant legal and financial exposure, but the broader war over who controls this fast-growing industry is far from settled.
