Key Takeaways
- Attorney General Letitia James initiated legal proceedings against Coinbase and Gemini, characterizing their prediction market offerings as unlawful gambling ventures
- Legal filings demand cessation of platform operations within New York State while pursuing monetary damages, penalties, and profit recovery
- For the first time in prediction market litigation, the federal Wire Act of 1961 has been cited as legal grounds
- Kalshi avoided inclusion in these lawsuits because of ongoing federal litigation against New York state regulators
- Coinbase petitioned for case relocation to federal jurisdiction, contending that federal statutes take precedence over state gambling regulations
On Tuesday, New York’s top legal official Letitia James launched formal legal action against cryptocurrency platforms Coinbase and Gemini. The complaints allege both exchanges operate unlawful gambling enterprises disguised as prediction market services.
Legal documents were submitted to a Manhattan state courthouse. The filings request permanent injunctions preventing both corporations from conducting unlicensed gambling activities throughout New York.
Additionally, the legal petitions demand restitution payments, return of illegally obtained revenues, compensatory damages, and substantial monetary sanctions. James stated that regardless of terminology, “gambling by another name is still gambling.”
She contended that the prediction market services provided by these companies amount to “just illegal gambling operations.” Furthermore, she emphasized these platforms subject younger demographics to potentially habit-forming products while lacking appropriate protective measures.
Invoking the Wire Act
The Attorney General’s office introduced a novel legal strategy in this dispute. Gaming law specialist Daniel Wallach noted that this lawsuit represents the first known application of the federal Wire Act of 1961 against prediction market operators.
The Wire Act criminalizes the utilization of wire communication systems for transmitting wagers on sporting competitions across state boundaries. Multiple federal appellate courts have determined this legislation applies to internet-based sports wagering.
This development carries significance because prediction market operators have previously maintained that federal legislation authorizes their business models. However, since the Wire Act itself constitutes federal law, companies cannot simply assert federal preemption as a defense.
The legal complaints accuse Coinbase and Gemini of “repeated and persistent” violations. The documents characterize the platforms as facilitating “what is quintessentially wagering” according to New York State statutes.
Neither organization possesses licensing from the New York State Gaming Commission. Consequently, they avoid paying the 51% gross revenue tax that legitimately licensed sportsbook operators must remit.
These tax revenues support public education initiatives, problem gambling intervention programs, and youth athletic organizations. New York State law additionally mandates bettors reach age 21, yet both platforms permit users between ages 18 and 20 to participate in sports-related wagering.
Kalshi’s Exemption Explained
Kalshi, currently the nation’s dominant prediction market platform, escaped mention in these lawsuits. The organization proactively filed suit against the New York State Gaming Commission in October 2025.
Kalshi petitioned federal courts to declare state gambling statutes inapplicable to CFTC-registered contract markets. A preliminary motion seeking to prevent the Attorney General from pursuing legal action against Kalshi remains under judicial consideration.
The CFTC has actively intervened to protect prediction markets at the federal level. This past April, the regulatory agency filed lawsuits against Arizona, Connecticut, and Illinois to prevent those jurisdictions from applying gambling legislation to CFTC-supervised platforms.
New York’s tactical approach mirrors strategies initially employed by Massachusetts. Rather than awaiting federal court challenges, both states initiated proceedings in state courts, forcing platforms into defensive postures.
Arizona escalated matters by filing criminal accusations against Kalshi in March. State prosecutors charged the company with operating an illegal gambling enterprise.
Currently, over ten states are engaged in active legal disputes concerning prediction markets.
Coinbase issued a swift response to the litigation. Chief Legal Officer Paul Grewal announced via X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Coinbase subsequently filed a motion transferring the proceedings to federal court. Grewal maintained that the Commodity Exchange Act completely supersedes state gambling statutes.
The company had already initiated preemptive legal action in Connecticut, Michigan, and Illinois during December 2025. The legal team prosecuting the Gemini case for New York includes former CFTC trial lawyers who directed the federal agency’s 2022 litigation against Gemini concerning bitcoin futures manipulation allegations.
Gemini resolved that previous matter in January 2025 by remitting $5 million without acknowledging wrongdoing. Congressional legislation could settle the jurisdictional debate, though judicial determinations are anticipated to arrive faster than legislative solutions.
