In a significant legal challenge within the U.S. crypto landscape, New York Attorney General Letitia James has filed lawsuits against subsidiaries of Coinbase and Gemini. The complaints, filed in Manhattan state court, accuse the exchanges of violating state law by operating prediction markets that the AG contends constitute illegal gambling.
The core of the Attorney General's argument rests on New York's legal definition of gambling. James alleges that the outcomes in these prediction markets are either beyond the control of participants or resemble games of chance. Consequently, she argues they should be regulated as gambling activities rather than legitimate financial markets. A key allegation is that both platforms failed to obtain the necessary licenses from the New York State Gaming Commission to operate these markets.
Further accusations include allowing underage participation. The complaint states Coinbase and Gemini permitted users aged 18 to 20 to use their platforms, despite New York law setting the minimum age for mobile sports betting at 21. "Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution," James stated, framing the issue as one of regulatory compliance, not mere branding.
The lawsuits seek substantial remedies, including the repayment of profits deemed illegal, civil penalties equal to triple those profits, and customer restitution. James also requests the court to block the exchanges from allowing anyone under 21 to place wagers and to restrict their marketing practices, including a potential ban on promoting services on college campuses.
The news triggered an immediate market reaction. Following the filing, Coinbase's stock (COIN) fell approximately 10%, trading around $200, while Gemini's associated stock (GEMI) dropped roughly 4%, moving below $5. As of the reports, no official statements had been issued by executives from either company.
This action occurs within the context of New York's strict BitLicense regulatory framework, established in 2015, which requires virtual currency businesses to obtain specific state authorization. The lawsuits also touch upon broader allegations, noted in supplementary reporting, that the exchanges operated without proper registration and offered unregistered securities, specifically referencing products like interest-bearing accounts. Legal experts suggest these cases could set important precedents for state-level regulation of digital asset exchanges and the classification of crypto-based financial products.
