Catenaa, Tuesday, April 21, 2026- Reports said thatNew York Attorney General Letitia James had sued Coinbase and Gemini today (Tuesday), accusing the two crypto firms of operating illegal gambling businesses through their prediction market platforms.
The lawsuit alleges that both companies allowed users to place bets on sports, elections, and other events without complying with New York gambling laws. State officials are seeking billions of dollars in penalties, restitution, and forfeiture of profits.
New York is asking for at least $2.2 billion from Coinbase and $1.2 billion from Gemini, according to court filings.
James said the prediction markets offered by the companies amount to illegal gambling under New York law.
According to the report, the attorney general argued that gambling rules still apply even when companies use digital assets and financial contracts instead of traditional sportsbooks.
James also criticized both firms for allegedly allowing people between the ages of 18 and 21 to participate. New York law requires users to be at least 21 years old for mobile sports betting.
The lawsuit targets Coinbase’s prediction market offering tied to Kalshi and Gemini’s prediction platform known as Gemini Titan.
Coinbase expanded its prediction market products across the US earlier this year through Kalshi, which is regulated by the Commodity Futures Trading Commission.
Gemini also moved into prediction markets after receiving regulatory clearance from the CFTC late last year.
Neither company immediately responded to the lawsuit. However, Coinbase Chief Legal Officer Paul Grewal said on X that prediction markets fall under federal oversight.
He argued that Congress intended these products to be regulated by the CFTC rather than individual states.
Prediction markets have become one of the fastest-growing areas in crypto and fintech.
These platforms allow users to trade contracts tied to the outcome of events such as elections, sports games, inflation data, and court rulings.
Supporters argue that prediction markets are financial tools that help users hedge risk and forecast future outcomes.
Critics say they often resemble gambling because users can profit from correct predictions on real-world events.
The legal fight reflects a broader dispute between federal regulators and states over who controls these platforms.
The CFTC has repeatedly argued that prediction markets belong under its authority when they operate as designated contract markets.
State governments, however, have claimed that many of these products violate local gambling laws.
The dispute has already spread beyond New York.
Earlier this month, the CFTC sued Illinois, Arizona, and Connecticut over efforts to shut down federally regulated prediction markets.
CFTC Chairman Michael Selig has argued that states should not interfere with platforms already approved at the federal level.
New York’s case could become one of the most important legal battles over prediction markets because it directly challenges whether federal approval can override state gambling rules.
If the state wins, prediction market companies may face stricter limits across the country.
If Coinbase and Gemini succeed, the ruling could strengthen the argument that these products belong under one national framework.
The lawsuit could create uncertainty for crypto companies expanding into event-based trading.
Prediction markets have become more popular because they offer new revenue streams beyond traditional crypto trading.
Many exchanges view them as a way to keep users active during periods of weaker digital asset prices.
A prolonged legal fight could delay new product launches and force firms to spend more on compliance.
It could also push some companies to limit access in states with stricter gambling laws.
For crypto firms, the case highlights the growing tension between state-level enforcement and federal oversight.
That tension is becoming more common as digital asset companies move into areas such as payments, sports-related products, and financial forecasting.
The lawsuit is likely to move through federal court over the coming months.
Judges may eventually have to decide whether prediction markets should be treated as financial products, gambling products, or a mix of both.
The outcome could shape how crypto exchanges, regulators, and state governments approach event-based trading in the future.
