Key Highlights
- Attorney General Letitia James initiated legal proceedings against Coinbase and Gemini, branding their prediction market services as unlawful gambling ventures
- Legal filings demand cessation of platform operations within New York state boundaries plus financial restitution and penalties
- Federal Wire Act from 1961 cited in unprecedented application against prediction market operators
- Kalshi avoided inclusion in these particular lawsuits because of its ongoing federal litigation with New York authorities
- Coinbase initiated proceedings to relocate the case to federal jurisdiction, contending that federal statutes supersede state gambling regulations
On Tuesday, New York’s Attorney General Letitia James launched legal proceedings targeting Coinbase and Gemini. The complaints allege both cryptocurrency platforms are conducting unlawful gambling activities via their prediction market services.
Court documents were submitted to a state court located in Manhattan. The legal action demands permanent cessation of both firms’ unlicensed gambling enterprises throughout New York territory.
The Attorney General’s submissions request restitution payments, surrender of earned revenues, monetary damages, and civil penalties. James declared that “gambling by another name is still gambling.”
She contended that the prediction markets these companies provide constitute “just illegal gambling operations.” Her statement emphasized concerns about exposing younger demographics to potentially addictive services lacking appropriate protective measures.
Federal Wire Act Integration
New York’s legal team introduced an innovative legal strategy to this dispute. Gaming law specialist Daniel Wallach noted that the complaint represents the first known application of the 1961 federal Wire Act against a prediction market operator.
The Wire Act prohibits utilizing wire communication systems for transmitting wagers on sporting competitions across state boundaries. Federal appellate courts have uniformly interpreted this legislation as encompassing internet-based sports wagering.
This development carries significance because prediction market companies have previously asserted that federal statutes authorize their business models. However, the Wire Act itself constitutes federal legislation, preventing companies from claiming blanket federal preemption arguments.
The legal complaints accuse both organizations of “repeated and persistent” violations of law. Court filings characterize the platforms as facilitating “what is quintessentially wagering” according to New York state statutes.
Neither organization possesses licensing from the New York State Gaming Commission. Consequently, they avoid the 51% gross-revenue taxation that licensed sports wagering operators must remit.
Those tax revenues support public educational initiatives, problem gambling intervention programs, and youth athletics funding. New York additionally mandates bettors reach minimum age 21, yet both platforms permit users between ages 18 and 20 to participate in sports-related wagering.
Kalshi’s Exemption Explained
Kalshi, recognized as the nation’s premier prediction market platform, escaped designation in these lawsuits. The organization proactively filed suit against the New York State Gaming Commission during October 2025.
Kalshi requested federal court determination that state gambling statutes cannot govern a CFTC-registered contract market. A pending motion seeks to prevent the Attorney General’s office from pursuing legal action against Kalshi.
The CFTC has undertaken efforts supporting prediction markets at the federal regulatory level. During April, the commission sued Arizona, Connecticut, and Illinois to prevent those jurisdictions from applying gambling regulations against CFTC-supervised platforms.
New York’s strategy mirrors tactics initially deployed by Massachusetts. Rather than awaiting federal court lawsuits, both jurisdictions filed in state court systems to position platforms defensively.
Arizona escalated matters by pursuing criminal charges against Kalshi in March. State prosecutors alleged the company operated an illegal gambling enterprise.
Currently, more than ten states participate in active legal disputes concerning prediction market operations.
Coinbase delivered a swift response to the lawsuit. Chief Legal Officer Paul Grewal announced via X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Coinbase subsequently filed to transfer proceedings to federal court. Grewal maintained that the Commodity Exchange Act entirely preempts state gambling legislation.
The organization had previously initiated preemptive legal actions in Connecticut, Michigan, and Illinois during December 2025. The legal representatives prosecuting the Gemini case for New York 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 admitting wrongdoing. Federal legislative action could clarify the jurisdictional questions, though judicial resolution appears likely to outpace congressional action on this matter.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
