The state of New York is taking cryptocurrency exchanges Coinbase and Gemini Titan to court after uncovering what Attorney General Letitia James believes amounts to the facilitation of illegal gambling.
A statement by the Office of the New York State Attorney General said: “Illegal operations expose New Yorkers, including those under the legal gambling age of 21, to serious financial and personal risk. Attorney General James is seeking court orders requiring Coinbase and Gemini to pay fines, forfeit illegal profits, and pay restitution to customers.”
Gambling in another name is still gambling, says James
New York has notoriously strict gambling regulations, taxing online sports betting revenue more than any other state by up to 51% at the operator level. Without proper safeguards in place, James argues, vulnerable members of society are at risk.
In a statement, she said: “Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution. Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails. My office is taking action to protect New Yorkers and stop these platforms from violating the law.”
Both companies offered prediction markets to New York users aged 18 and older. These platforms allow users to place money on outcomes of events such as sports, elections, and awards, where results are uncertain or based on chance.
According to the claims, the companies did not obtain licenses from the New York State Gaming Commission. The complaint also states the platforms did not meet requirements applied to licensed casinos and mobile sports betting operators, including tax obligations and age restrictions set at 21 for such activities.
Studies cited include research from the National Institutes of Health and the American Psychological Association on potential links between early gambling exposure and mental health outcomes, as well as gambling-related risks. Separate findings from the American Psychological Association report that 32% of people with gambling disorders have experienced suicidal thoughts.
Coinbase and Gemini Titan sued for $1.2 billion and $2.2 billion, respectively
James is seeking to recover alleged unlawful profits, impose civil penalties of up to three times to which those profits amount, and secure restitution for customers. The proposed measures also include prohibiting wagers by individuals under 21 and limiting Coinbase and Gemini from marketing on college campuses.
Shares tumbled in Coinbase by more than 7% on the news, while Robinhood also saw its share price slide by 5%, despite not being named in the lawsuit.
The figures mentioned in potential recourse are several magnitudes larger than any fines handed out to gambling operators. For example, Caesars Entertainment was fined $7.8 million by Nevada regulators over anti-money laundering breaches, while other recent cases have ranged from about $8.5 million to $10.5 million.
Internationally, some of the largest enforcement actions, such as those involving William Hill and Entain, have reached roughly $20 million to $24 million. Even cumulatively, global regulatory fines across the industry typically total around $160 million over several months, remaining well below the billion-dollar level.
Some within the prediction market industry see the potential size of the fines as state officials siding with the regulated gambling lobby, which has long lobbied against sports event contracts due to the dilution of its customer base.
Indeed, John DeCree, director of global gaming research at CBRE, said in a Monday note that same-state online sportsbook handle fell 2.3% in January and February. Early data from March indicates the decline may have continued, which would mark a fourth consecutive month of year-over-year decreases.
DeCree said multiple factors could be contributing to the drop, but noted the timing aligns with a sharp rise in trading volumes for sports-related contracts.
Coinbase to continue advocating for federal regulation
Hitting back at AG James, Coinbase Chief Legal Officer Paul Grewal said on social media platform X: “Coinbase will continue to fight for the federal oversight of these markets that Congress intended,”
He added: “We have removed this action to federal court pursuant to 28 U.S.C. §§ 1331, 1441, and 1442. New York’s claims necessarily raise disputed and substantial questions of federal law. They are subject to complete preemption. And New York cannot defeat federal-officer removal through artful pleading.”
A spokesperson for Gemini Titan has yet to respond to the lawsuit.
Other prediction market companies, like Kalshi and Polymarket, have not been targeted. Kalshi previously filed a suit against the New York Gaming Commission after receiving a cease-and-desist order, arguing the regulator’s actions conflicted with federal law. That case remains unresolved.
The lawsuit, however, could serve as an early test in a legal dispute with big consequences that may ultimately be decided by the U.S. Supreme Court.
