Yet another regulatory limbo follows the prediction market. New York Attorney General Letitia James announced that they sued Coinbase and Gemini for claims of betting events where people were allowed to bet on sports or elections illegally.
Lawsuit for operating unlicensed gambling platforms
A statement that came out on Tuesday pointed towards two companies running afoul of New York laws. James alleged that both companies operated what she described as unlicensed gambling platforms.
The state is seeking financial penalties, including at least $2.2 billion from Coinbase and $1.2 billion from Gemini, alongside restitution and the forfeiture of profits that are built unlawfully, according to documents.
According to James, the platform allowed users of the age group between 18 and 21 to participate in the alleged gambling activities, which goes against the New York law that requires the users to be at least 21 years old.
“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. “Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails.”
Inside Coinbase and Gemini’s push into prediction markets
Coinbase officially stepped into prediction markets in the US markets to trade yes/no contracts on everything from elections to sports, entertainment, and economic indicators.
Gemini, by the two brothers Cameron and Tyler Winklevoss, launched Gemini Predictions in December 2025. Gemini Titan holds a Designated Contract Market (DCM) license from the CFTC after a 5-year licensing process.
This segment powers “Gemini Predictions” in the Gemini Web and Mobile interface. The company has also been working towards a compliant alternative to decentralized competitors.
The complaints filed in Manhattan state court state that Coinbase Financial Markets and Gemini Titan are both subjected to obtaining New York State Gaming Commission licenses to operate in markets where people trade based on the predicted outcomes of events such as sports and elections.
However, Coinbase Chief Legal Officer Paul Grewal made a statement on X, stating that the prediction markets are regulated by the CFTC and not under the state.
Growing market raises fresh regulatory questions
Earlier this year, Coinbase expanded its prediction market offerings across the United States, partnering with a CFTC-regulated exchange, Kalshi. Meanwhile, Gemini secured regulatory approval for its product, Gemini Titan, entered the prediction market.
The lawsuit alleges that these businesses, by operating under CFTC regulations, avoid paying the same taxes as licensed casinos or mobile sportsbooks, who are subject to an approximate 51% tax of their gross revenue.
