The attorney general calls prediction market bets “illegal gambling under another name.” The exchanges are moving to transfer the case to federal court.
New York Attorney General Letitia James has filed lawsuits against crypto exchanges Coinbase and Gemini. Authorities argue that prediction market contracts related to sports, entertainment, and elections violate state gambling laws.
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In December 2025, Coinbase and Gemini began offering access to prediction markets, including Polymarket and Kalshi, within the same interface where users trade cryptocurrencies and stocks.
The complaint notes that the platforms allow betting from age 18, while mobile gambling is only permitted at 21 in New York.
Coinbase Moves Case to Federal Court
Coinbase Chief Legal Officer Paul Grewal stated that the company has filed a motion to transfer the lawsuit from state court to federal court. The argument: the case raises “disputed and substantial questions of federal law” and falls under “complete preemption,” where federal law takes priority over state law.
Grewal insists that prediction markets are federally regulated national exchanges, and Coinbase will pursue federal oversight.
Gemini declined to comment on the lawsuits.
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Conflict Between States and the CFTC
Earlier, Nevada, Washington, Michigan, and several other states filed similar lawsuits, arguing that sports bets are indeed bets, not financial instruments. The matter is currently under review in multiple appellate courts.
Commodity Futures Trading Commission (CFTC) Chairman Mike Selig insists that prediction markets, including sports contracts, fall under his agency’s exclusive jurisdiction. The CFTC has filed lawsuits against regulators in Arizona, Connecticut, and Illinois to prevent them from bringing charges against prediction market operators. The regulator has also intervened in the Nevada case in defense of such platforms.
In early April, a New Jersey court allowed Kalshi to offer predictions on sports events. The judge ruled that local regulators lack the authority to ban such products since the service operates under CFTC oversight.
Prediction markets are already banned in Argentina, Singapore, Thailand, Australia, and several European countries.
Read more: What’s Happening With Prediction Markets in the US—A Look at Recent Initiatives
