New York’s Attorney General has launched a sweeping legal challenge against cryptocurrency giants Coinbase and Gemini, alleging they’ve been operating illegal gambling operations disguised as prediction markets. The lawsuits, filed in New York Supreme Court, could trigger substantial financial penalties and reshape the burgeoning world of crypto-based wagering.
At the heart of the dispute is the claim that these platforms allowed residents to bet on everything from sporting events and election outcomes to reality television shows – all without the necessary gaming licenses required by New York law. The Attorney General argues that labeling these wagers as “market contracts” doesn’t alter their fundamental nature as gambling.
The state’s investigation wasn’t theoretical; investigators actively participated, placing approximately 22,000 bets on Coinbase and 12,000 on Gemini over a two-and-a-half-month period. They meticulously tracked account creation, wager placement, fees, and payout processes, building a detailed case against the companies.
New York already maintains a highly regulated sports betting system, generating over $1 billion annually for the state through strict rules and taxes. Officials contend that these prediction markets circumvent that established framework, offering similar risks without the same consumer protections.
The Attorney General’s office is seeking to compel both firms to forfeit profits, compensate consumers, and pay fines potentially three times the amount of illegally gained revenue. Crucially, the lawsuits also request permanent court orders to halt operations within New York state.
The Gemini complaint centers on “Gemini Predictions,” launched in December 2025 and initially available nationwide. Users were able to wager on outcomes ranging from the Super Bowl to college basketball and even the results of the reality show “Survivor.”
Prosecutors argue Gemini deliberately attempted to sidestep gambling regulations by framing wagers as “event contracts” within a “prediction market.” The state also alleges the platform allowed participation from individuals aged 18-20, violating New York’s 21-and-over age restriction for sports betting.
Coinbase faces similar accusations, having entered the prediction market in December 2025 with products also available across all 50 states. Users could bet on the New York Knicks’ performance, the Super Bowl winner, and college basketball games featuring local teams like St. John’s.
A promotional campaign offering a $1,000,000 Bitcoin prize pool for correct Super Bowl predictions further fueled the allegations. Legal analysts suggest these lawsuits may represent the first time a U.S. law enforcement agency has accused a prediction market of violating the federal Wire Act through interstate sports-event contracts.
Adding a layer of complexity, the Attorney General’s office is being led by attorneys with prior experience at the Commodity Futures Trading Commission (CFTC). Their expertise in derivatives markets could prove pivotal if the defense attempts to argue these products fall under federal, rather than state, jurisdiction.
The legal battle may not end with Coinbase and Gemini. Experts predict that Kalshi, a federally regulated exchange, could be the next target, particularly once pending litigation regarding a preliminary injunction is resolved. This case could trigger a domino effect, reshaping the landscape of prediction markets nationwide.
