New York Attorney General Letitia James has launched a legal challenge against Coinbase and Gemini, accusing the crypto giants of running illegal gambling operations through their prediction markets.
New York Attorney General Letitia James sued Coinbase and Gemini on Tuesday, alleging that the two crypto exchanges’ prediction market platforms constitute illegal and unlicensed gambling that violates state law.
The twin lawsuits filed in a state court in Manhattan seek to permanently enjoin the companies from operating an unlicensed gambling business in New York. The filings also seek restitution, disgorgement of profits, damages, and financial penalties.
James said in her statement that “gambling by another name is still gambling” and it’s not exempt from regulation under New York state laws and constitution.
She said that Gemini and Coinbase’s “so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.”
The lawsuit comes at a time when state gaming authorities and attorneys general argue that prediction markets function as online sportsbooks using a different name. Meanwhile, a federally licensed industry backed by the Trump administration argues that Washington should write the rules.
A New Legal Weapon
The New York Attorney General’s office did not just recycle the arguments other states have used. In what gaming attorney Daniel Wallach described as a first-of-its-kind move, the suit appears to invoke the federal Wire Act of 1961. This law makes it illegal for entities to use wire communications to transmit bets or wagers on sporting events across state lines.
According to Wallach, the New York AG’s Office has become the first law enforcement agency in the country to accuse a prediction market platform of violating the federal Wire Act by offering sports-event contracts across state lines. Courts could accept the Wire Act argument, with major implications nationwide.
Federal appeals courts have consistently held that the Wire Act covers internet sports betting. Unlike the Commodity Futures Trading Commission’s (CFTC) arguments that federal law preempts state gaming statutes, the Wire Act itself stands as a federal statute. That means platforms cannot simply claim that federal law supports their position.
The Allegations
The two lawsuits accuse Coinbase and Gemini of engaging in “repeated and persistent” illegality in “flagrant disregard” of New York’s constitution and penal laws.
The filings allege that the platforms offer “what is quintessentially wagering.” Therefore, these actions fall within New York’s definition of gambling but fail to comply with state licensing and regulatory requirements.
The filings provided specific examples of wagers on sports teams and events offered to users.
James noted that neither company holds an NYSGC license, so they do not pay the 51% gross-revenue tax that licensed sportsbooks must pay. That money funds public education, problem gambling treatment, and sports programs for disadvantaged youth.
New York also enforces an age restriction requiring bettors to be at least 21 years old. At the same time, both Coinbase and Gemini allow users between 18 and 20 to participate in sports-related markets.
Why Not Kalshi?
Kalshi was notably absent from Tuesday’s lawsuit, despite being the largest and most prominent prediction market in the country.
Kalshi preemptively sued the NYSGC in October 2025. It asked a federal court in the Southern District of New York to rule that state gambling laws cannot apply to a CFTC-registered designated contract market.
The motion for a preliminary injunction, which seeks to bar the attorney general’s office from filing civil or criminal enforcement proceedings against Kalshi, remains pending.
Meanwhile, the CFTC sued Arizona, Connecticut, and Illinois on April 2 to block those states from enforcing their gambling laws against CFTC-regulated prediction markets. The federal government took states to court over this issue for the first time.
The agency also joined Kalshi’s lawsuit against Arizona, and recently, a federal judge granted a temporary restraining order against the state.
The omission leaves open questions about how New York will approach CFTC-registered platforms, as state and federal authorities continue to clash over jurisdiction.
The Attorneys Behind the Suits
Attorney General James’s choice of attorneys to lead the case is notable. According to the press release, Assistant Attorneys General Alejandra de Urioste and K. Brent Tomer are handling the civil enforcement action against Gemini.
They previously worked as CFTC trial attorneys. The two led the federal regulator’s 2022 lawsuit against Gemini Trust over alleged misrepresentations to regulators about bitcoin futures manipulation.
Gemini resolved that case in January 2025 by agreeing to pay a $5 million settlement without admitting or denying liability. They later left the agency and are now leading the case against Gemini on behalf of the State of New York.
The State Versus Federal Battlefield
New York’s move marks the latest development in a deepening state-level offensive that has been building since Nevada became the first state to act against prediction markets in March 2025 by issuing cease-and-desist orders against operators.
Prediction market platforms initially held the upper hand, securing preliminary injunctions by suing their opponents in federal court.
However, states adapted, beginning with Massachusetts, which filed in state court rather than waiting to be brought into federal court, forcing Kalshi onto the defensive. New York has now followed the same playbook with Gemini and Coinbase.
Arizona escalated further by pursuing criminal charges. The state’s Attorney General Kris Mayes brought the first criminal case against a prediction market operator in March by charging Kalshi with running an illegal gambling business.
The current legal landscape shows deep division, and a Supreme Court case now appears inevitable.
The Industry Strikes Back
Coinbase quickly pushed back against the New York lawsuit. Its Chief Legal Officer, Paul Grewal, posted on X that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.” Grewal framed the state lawsuit as an encroachment on federal authority.
Coinbase has now exercised its right to transfer the case to federal court, where it has achieved more success. In a follow-up X post, Grewal said that the Commodity Exchange Act completely preempts state gambling law. He further argued that “New York cannot defeat federal-officer removal through artful pleading.”
Coinbase had already gone on offense in December 2025 by filing preemptive lawsuits in Connecticut, Michigan, and Illinois to challenge state efforts to restrict prediction markets.
What Comes Next
More than ten states are now involved in active litigation, placing the prediction market industry in a period of legal uncertainty despite its impressive growth. Federal legislation could resolve the jurisdictional question once and for all.
However, legislation typically moves much more slowly than the courts. The next few months will reveal a lot about the future that prediction markets have in the U.S.
The post New York AG Sues Coinbase, Gemini Over Prediction Markets appeared first on Gambling Insider.
