Key Takeaways
- On April 21, the Attorney General of New York State sued Coinbase and Gemini
- Under NY state law, both companies’ prediction markets plaftorms have been recognized as illegal gambling operations
- Illegal revenue confiscation sought and fine of triple profits, claiming a total of $3.4 billion
- COIN stock fell 6% in response to lawsuit, growing sense of regulatory caution
NY State Sues Two Companies: “Prediction Markets Are Illegal Gambling”
On Monday this week, April 21, New York Attorney General Letitia James filed a lawsuit against the prediction market platforms of Coinbase, a major cryptocurrency exchange, and Gemini, Google’s advanced generative AI system. She alleged that the two platforms constituted illegal gambling operations under state law.
The lawsuit is pinned on “prediction markets”, where users can bet their funds on events that have uncertain results or outcomes, such as sports games, elections, and award ceremonies. The Attorney General’s Office harshly criticized the platforms as “a gambling business that has only changed its name.”
Moreover, the complaint seeks to confiscate illegal profits and civil fines equivalent to three times the profits. According to media reports, Coinbase is expected to be required to pay fines of at least $2.2 billion (about 350 billion yen) and Gemini for its part, at least $1.2 billion (about 190 billion yen).
Coinbase (COIN) shares dropped by 6% in response to the suit, raising a mounting sense of caution regarding regulatory risks for prediction market platforms as a whole.
Nationwide Expansion Unlicensed, College Games Also Subject to Betting
Coinbase and Gemini both launched their prediction market businesses in December 2025 and have been deploying services in all 50 U.S. states.
However, they have both continued to operate in New York State without a license from the New York State Gaming Commission. Both also do not pay approximately 51% sales tax paid by mobile sports betting operators and licensed casinos.
The New York State Attorney General’s Office found this unauthorized operation unacceptable and determined that the “event contract” the two companies provided constitutes gambling under state law since the outcome of the event is not influenced by the actions of the participants; moreover, it relies on chance.
The complaint also points out that state law prohibits betting on games involving college teams as a basis for violations.
Coinbase was betting on the basketball game between the University of St. John’s vs. Providence on February 14, 2026, and Gemini was betting on the game between University of St. John’s vs. University of Connecticut on February 25, 2026, respectively, according to the complaint.
Platform “Exposes Young People to Dependence”
In addition to sports betting in universities, the Attorney General’s Office is concerned that Coinbase and Gemini have offered their services to users aged 18 to 20, which is against state law that sets the minimum age for mobile sports betting at 21.
The Attorney General’s Office pointed out a survey by the National Institutes of Health which showed that early exposure to gambling increases the risk of depression, anxiety, mood swings, and financial stress in young people.
Moreover, a study by the American Psychological Association reported that 32% of people with gambling addiction disorders experienced suicidal ideation. The Attorney General’s Office argues that both platforms lack sufficient user protection.
In January 2026, Attorney General James filed a lawsuit against Valve, a game developer, for promoting illegal gambling through video games popular with children and teenagers. This lawsuit is an extension of its enforcement policy focused on protecting young people.
