The New York attorney general on Tuesday sued Coinbase and Gemini Titan, two cryptocurrency giants that have expanded into online betting, accusing them of illegally running gambling operations in the state.
Letitia James, the attorney general, filed two lawsuits in State Supreme Court in Manhattan, saying the two companies recently expanded into prediction markets, allowing their users to gamble on sports and other events. However, the office says neither company was ever licensed with the New York State Gaming Commission and allowed people under the age of 21, the legal gambling age in the state, to participate.
In a statement, Ms. James said “Gambling by another name is still gambling.”
“Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails,” Ms. James said.
Paul Grewal, the chief legal officer at Coinbase, said on X that “prediction markets are federally regulated national exchanges.” He added that “Coinbase will continue to fight for the federal oversight of these markets that Congress intended.”
Mr. Grewal said the issue was currently proceeding in New York federal court. Gemini did not respond to requests for comment.
The office is asking that the court require Coinbase and Gemini to forfeit what they argue are illegal profits, in addition to distributing “restitution to consumers who were harmed, and pay fines equal to three times the profits the companies made through their illegal actions.”
The lawsuits on Tuesday touch on two prime issues for states and government regulators across the country in recent years: ubiquitous online gambling and the world of cryptocurrency.
For years, crypto has been promoted as a way to free money from the restraints of government regulation. Scams and risky practices have flourished, and when the currency is gone, there is often little recourse for victims.
At the same time, many states have legalized online sports gambling and casino games in recent years, raking in billions of dollars in tax revenue and creating a race to tap into the market. Platforms that let users wager on almost anything have seen people cash in on predictions. Sports leagues have been mired in insider betting scandals, and a growing number of Americans are seeking help for gambling problems.
And in an effort to regulate the industry, states have sued leaders in the prediction market space, even going after them criminally. The companies have also fought back. They have argued that bets made through their apps are different from bets made at a casino, making their businesses not subject to gambling taxes or regulations. Kalshi, one of the biggest players, sued the New York State Gaming Commission last year, accusing the agency of overreach.
In February, the New York attorney general’s office issued a consumer alert warning against “platforms offering bets masquerading as ‘event contracts.’” The platforms, the warning said, offer betting on topics like political elections and sports events, but are doing so without the supervision of state regulators.
In the suit this week, the office said that Coinbase enticed New Yorkers, and others, by offering promotions, like a $1 million “Bitcoin prize pool,” where people who had made five correct game-day predictions during the Super Bowl this year could have received a share of the pool. The company also offered awards for referrals, according to the suit.
Gemini also offered bettors the ability to wager on who would win the Super Bowl this year and on college basketball games, like the one between St. John’s University and the University of Connecticut, the suit said.
The companies are violating New York laws that forbid any betting on games in which New York college teams participate, the office said.
The goal of Gemini and Coinbase is to avoid the legal and financial consequences of being under the scrutiny of New York’s regulations on gambling, the office said. Instead of operating as licensed mobile sports wagering companies, whose gross revenues are taxed at a rate of approximately 51 percent, according to the lawsuits, the two companies offer wagering under the “guise” of event contracts and prediction markets, they said.
