New York has escalated its enforcement posture against crypto platforms—this time targeting so-called prediction markets.
On April 21, 2026, the New York Attorney General filed lawsuits against Coinbase Financial Markets and Gemini Titan, alleging that their event-based trading platforms constitute illegal gambling under state law.
These platforms allow users to trade on the outcome of real-world events—elections, sports, and economic indicators—through “yes/no” style contracts. The state’s position is blunt: each of these contracts is effectively a bet.
Gambling By Another Name
The lawsuits center on a straightforward theory: If users are staking money on outcomes outside their control, the activity is gambling—regardless of whether it is framed as “trading.”
New York alleges the contracts are games of chance, as opposed to legitimate financial instruments, and the platforms therefore operated without appropriate licenses from the state gaming authority.
New York went on to emphasize that users as young as 18 were allowed to participate, despite the 21+ requirement for betting in the state.
In other words, the state is not trying to regulate these products in a new manner. Rather, it is trying to recharacterize them entirely and fit them into a preexisting framework. Coinbase’s Chief Legal Officer, Paul Grewal, has stated that they will continue to push for federal oversight under the CTFC, rather than the state, for prediction markets.
The Bigger Fight: State v. Federal
As Grewal hinted, this case is not really about prediction markets—it is about who gets to control them.
On one side are the platforms, backed by a growing chorus of industry lawyers and former regulators, arguing that these products fall squarely within the jurisdiction of the Commodity Futures Trading Commission and existing frameworks. The theory is straightforward: event-based contracts are derivatives, and derivatives are federally regulated.
Among the more prominent voices advancing this position is Mike Selig, who has argued that once a product qualifies as a derivative, state-level recharacterization as “gambling” is not just incorrect—it is preempted. In that view, allowing 50 different state regimes to redefine federally regulated products would fracture markets and undermine uniform oversight.
On the other side, states—led here by Letitia James—are advancing a far more aggressive theory of authority. Their position is that no amount of financial engineering can obscure what these products actually are: wagers on uncertain events. And if they are wagers, they fall within the traditional police powers of the states to regulate gambling, regardless of how they are labeled or structured. This is not simply a technical disagreement, but a direct challenge to the idea that federal commodities law occupies the field.
What makes this clash particularly consequential is that both sides are, in different ways, right—and the law has not yet cleanly resolved the overlap. Federal courts have, at times, signaled that the CFTC’s authority over derivatives is expansive. But states have long retained broad power to regulate gambling within their borders, and they are now testing just how far that power extends into crypto-native financial products.
The result is a high-stakes jurisdictional collision. If the federal view prevails, prediction markets may consolidate under a single regulatory framework, with clearer pathways to compliance and expansion. If the states succeed, the same product could be lawful in one jurisdiction and prohibited in another, with retroactive liability layered on top.
This case is poised to force that question into the open—and whatever answer emerges will shape not just prediction markets, but the broader boundary between financial innovation and state enforcement power.
The Cost of (Alleged) Noncompliance
The relief sought is sweeping—and potentially existential. New York is not merely seeking to halt these platforms, but unwind them. The complaint demands disgorgement of all profits, civil penalties of up to three times alleged gains, full restitution to users, and injunctive relief that could effectively shut down the business lines at issue.
But the most striking exposure lies in the state’s demand for statutory penalties of $100,000 per offer or attempted offer of sports wagering. If interpreted to include each individual wager, the liability is astronomical. For reference, the Office of the Attorney General alone alleges to have placed 22,000 bets on Coinbase. While it is unclear if the state’s wagers would be included in the penalty count, that number teases just the surface of sums Coinbase and Gemini face.
The State has also gone a step further, seeking a full accounting from Coinbase and Gemini of their alleged gambling operations, including total bets placed, customer losses, and all revenues received. That request signals where this is heading: not just enforcement, but a detailed financial reconstruction designed to quantify—and ultimately claw back—the entire market.
What to Do If You Lost Money
If you participated in these prediction markets and incurred losses, this may directly affect your rights. If you lost money on Coinbase or Gemini’s prediction markets, reach out to Kelman PLLC for a free consultation. These cases often move quickly once enforcement begins, and early positioning matters—especially where recovery pools or negotiated resolutions are involved.