New York Just Sued Two Crypto Exchanges for Illegal Gambling — Here’s What Bettors Using Prediction Markets Should Know Right Now

New York Attorney General Letitia James filed lawsuits on April 21, 2026 against Coinbase Financial Markets and Gemini Titan, accusing both cryptocurrency exchanges of operating illegal gambling businesses in New York through their prediction market platforms. The complaints were filed in Manhattan state court and seek to bar both companies from running their prediction market operations in New York unless they obtain licenses from the state Gaming Commission.

“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James said in a statement accompanying the filings. “Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.”

What the Lawsuits Actually Allege

The core legal argument is that prediction markets, which allow users to stake money on the outcome of future events, meet New York’s legal definition of gambling because outcomes are determined by chance or by factors outside the bettor’s control. James argues that both platforms have been offering wagering on sports games, elections, and entertainment events — products that look and function exactly like sports betting, just under a different regulatory framework.

According to the complaint, Coinbase’s platform offered bets on whether the New York Knicks would win a game by more than 6.5 points and on the outcome of the February 8, 2026 Super Bowl. Gemini’s platform reportedly allowed wagers on whether the New York Mets would win by more than 1.5 runs and similar sports outcomes. Neither company holds a license from the New York State Gaming Commission, and the AG’s office says that means they have been sidestepping the roughly 51% gross revenue tax that licensed mobile sportsbooks are required to pay the state.

There is also an age verification issue at the center of both lawsuits. New York state law requires a minimum age of 21 for mobile sports betting. Both Coinbase and Gemini reportedly allowed users as young as 18 to participate in their prediction market platforms, a direct conflict with state consumer protection rules. The AG is seeking to force both platforms to stop accepting wagers from users under 21 and to ban college campus marketing. The lawsuits also seek recovery of illegal profits, civil fines equal to three times those profits, and restitution for affected customers.

How the Platforms Are Responding

Coinbase pushed back immediately. Paul Grewal, the company’s chief legal officer, said in a statement that prediction markets are federally regulated national exchanges registered with the Commodity Futures Trading Commission and that the matter was already being litigated in New York federal court. “Coinbase will continue to fight for the federal oversight of these markets that Congress intended,” Grewal said. The company’s argument is essentially that the CFTC’s jurisdiction preempts state enforcement.

This is the same legal theory that Kalshi, another major prediction market operator, has been advancing since October 2025 when the New York Gaming Commission sent it a cease-and-desist letter. Kalshi promptly sued the commission and argued federal law preempted the state action. That case is still working its way through the courts.

What This Means If You Use Prediction Markets in New York

If you are a bettor in New York who has been using prediction market platforms, these lawsuits create real uncertainty about platform availability. The AG is specifically asking the court to bar both Coinbase and Gemini from operating their prediction markets in New York unless they get licensed. A court order enforcing that request could mean access is cut off — potentially quickly if a judge grants an injunction while the case proceeds.

The broader concern is that even if Coinbase and Gemini win their federal preemption argument, the regulatory environment for prediction markets is tightening fast. New York is not acting alone. Multiple states have sent cease-and-desist letters to prediction market operators, and more than ten bills have been introduced in Congress addressing everything from insider trading to broader prohibitions on sports event contracts.

For bettors who want a regulated, licensed product, the landscape is clearer on the traditional sportsbook side. Licensed sportsbooks operating in New York pay taxes, comply with age verification, and are accountable to the state Gaming Commission. They offer protections that prediction market platforms currently do not, and right now they are also far less legally vulnerable.

The Coinbase and Gemini lawsuits mark the most aggressive state-level enforcement action against prediction markets from a major state attorney general to date. Whether the courts side with New York or with the platforms’ federal preemption argument will shape what prediction market access looks like across the country for years to come.