New York Attorney General Letitia James has sued both Coinbase (NASDAQ:COIN) and Gemini (NASDAQ:GEMI), alleging the operation of illegal gambling platforms.
The NY AG noted that both platforms enable prediction markets that allow users to bet on events such as sports and elections. The announcement said that neither platform has obtained a gambling license from the New York State Gaming Commission.
At the same time, these platforms are described as exposing young New Yorkers (under 21) to financial risk.
The lawsuit follows other states pursuing similar legal action, claiming states have oversight over the gaming sector. Meanwhile, the Commodity Futures Trading Commission (CFTC) is challenging these state attempts, which challenge federal authority in the courts.
According to the AG’s office, an investigation found the two platforms operated prediction markets that “constitute illegal, unlicensed gambling operations.”
AG James issued the following statement:
“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution. Gemini and Coinbase’s so-called prediction markets are just illegal gambling operations, exposing young people to addictive platforms that lack the necessary guardrails. My office is taking action to protect New Yorkers and stop these platforms from violating the law.”
Earlier this month, CFTC Chairman Michael S. Selig said his agency would “continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators.” The CFTC soon announced a legal victory in the court of appeals.
In general, the federal government has pre-emptive power over state regulation. At the same time, the gaming industry does not like the competition from upstart prediction markets. Additionally, there is a political element here as the Trump Administration has been supportive of Fintech innovation and the NY AG is a notable opponent to the Trump Administration. AG James ran for her office, declaring her intent to undermine the Trump presidency.