Quick Overview
- Attorney General Letitia James initiated legal action against Coinbase and Gemini, labeling their prediction market services as unlawful gambling activities
- The legal actions aim to halt platform operations within New York state borders while pursuing financial recovery and sanctions
- Attorneys cited the 1961 federal Wire Act for the first time in litigation targeting prediction market services
- Kalshi avoided inclusion in these lawsuits because of its ongoing federal litigation with New York state authorities
- Coinbase filed for federal court transfer, contending that federal statutes supersede state-level gambling regulations
On Tuesday, New York’s top legal official Letitia James initiated legal proceedings against cryptocurrency platforms Coinbase and Gemini. The complaints characterize both exchanges as operating unlawful wagering services via their prediction market offerings.
Both complaints were submitted to a state court in Manhattan. The filings demand permanent injunctions preventing both entities from conducting unlicensed betting operations within state boundaries.
Additionally, prosecutors are requesting customer reimbursements, forfeiture of earnings, compensatory damages, and monetary sanctions. James declared that “gambling by another name is still gambling.”
She contended that the prediction platforms run by these companies function as “just illegal gambling operations.” The Attorney General emphasized that such services put minors at risk of addiction without adequate protective measures.
Introduction of the Wire Act Defense
New York’s legal team introduced an unprecedented legal strategy in this dispute. Gaming law specialist Daniel Wallach noted that this represents the first instance of the 1961 federal Wire Act being applied against a prediction market operator.
The Wire Act prohibits the transmission of betting information on athletic competitions through wire communications across state boundaries. Multiple federal circuit courts have determined this statute applies to online sports wagering.
This development carries significance because prediction platform operators have maintained that federal regulations authorize their business models. However, the Wire Act itself represents federal legislation, meaning companies cannot simply assert federal preemption as a defense.
The complaints characterize both Coinbase and Gemini as engaging in “repeated and persistent” violations of law. The documents assert these platforms provide “what is quintessentially wagering” according to New York statutes.
Neither platform possesses a New York State Gaming Commission authorization. Consequently, they avoid paying the 51% gross-revenue levy that authorized sportsbooks must remit.
Those tax revenues support public school systems, gambling addiction services, and youth athletic initiatives. New York regulations also mandate that bettors reach age 21, yet both services permit individuals between 18 and 20 to wager on sports-related outcomes.
Kalshi’s Absence from Legal Action
Kalshi, currently the nation’s most prominent prediction market operator, escaped inclusion in these lawsuits. The firm proactively filed suit against the New York State Gaming Commission during October 2025.
Kalshi petitioned federal court to declare state gambling statutes inapplicable to CFTC-registered contract markets. A request to prevent the Attorney General’s office from pursuing legal action against Kalshi remains under judicial consideration.
The CFTC has actively supported prediction markets through federal intervention. Last April, the commission filed lawsuits against Arizona, Connecticut, and Illinois to prevent these jurisdictions from applying gambling regulations to CFTC-overseen platforms.
New York’s tactical approach mirrors a strategy initially deployed by Massachusetts. Rather than awaiting federal court lawsuits, both jurisdictions filed state-level cases to place platforms in defensive positions.
Arizona escalated matters further by bringing criminal proceedings against Kalshi in March. State prosecutors charged the organization with operating an unlawful gambling enterprise.
Over ten states currently participate in active legal disputes concerning prediction market platforms.
Coinbase issued a swift response to the legal challenge. Paul Grewal, the company’s Chief Legal Officer, stated on X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Coinbase subsequently petitioned for case transfer to federal jurisdiction. Grewal maintained that the Commodity Exchange Act entirely preempts state gambling legislation.
The exchange had already launched preemptive legal challenges in Connecticut, Michigan, and Illinois during December 2025. The legal professionals representing New York in the Gemini case previously served as CFTC trial lawyers and directed the federal agency’s 2022 enforcement action against Gemini regarding bitcoin futures manipulation allegations.
Gemini resolved that previous matter in January 2025 through a $5 million settlement without acknowledging wrongdoing. Federal legislative action could settle the jurisdictional debate, though judicial proceedings are anticipated to conclude before congressional action on this matter.
