New York is seeking at least $3.4 billion in combined claims against Coinbase and Gemini over alleged unlicensed prediction markets. The scale signals intensifying regulatory pressure on crypto firms offering event-based contracts in the United States.
New York Attorney General Letitia James filed lawsuits alleging both companies enabled state residents to access prediction-style products without licenses from the New York State Gaming Commission. The filings claim users aged 18 to 21 could access these markets, despite a legal minimum age of 21 for mobile sports betting. Coinbase has moved to shift the case to federal court, while Gemini has not publicly responded.
Are Prediction Markets Federal Or State Jurisdiction?
The dispute reflects a broader jurisdictional conflict between state regulators and federal agencies over oversight of prediction markets. The Commodity Futures Trading Commission (CFTC) maintains these products fall under federal derivatives law, while states argue local gambling statutes still apply. Prediction platforms have expanded rapidly, with billions in user volume tied to sports and political outcomes over the past year.
“Gambling by another name is still gambling,” James said in a statement, adding that such products are not exempt from state law or constitutional requirements.
Coinbase Chief Legal Officer Paul Grewal countered that the claims raise substantial federal questions, citing statutes governing federal jurisdiction and arguing the case is subject to federal preemption.
We have removed this action to federal court pursuant to 28 U.S.C. §§ 1331, 1441, and 1442. New York’s claims necessarily raise disputed and substantial questions of federal law. They are subject to complete preemption. And New York cannot defeat federal-officer removal through… https://t.co/oYZpC1Cg6P pic.twitter.com/U2CTU7Vo7u
— Paul Grewal (@iampaulgrewal) April 22, 2026
Still, the legal stakes extend beyond financial penalties. Court filings indicate New York is pursuing $2.2 billion from Coinbase and $1.2 billion from Gemini, tied to alleged profits from unlicensed operations. The enforcement action also seeks to halt access to these products in the state unless firms comply with licensing rules, raising operational risks for similar platforms.
But the core question remains unresolved: can states enforce gambling laws on products framed as federally regulated derivatives? The answer could redefine compliance requirements across crypto-linked prediction markets, with the next catalyst likely emerging from early court rulings on jurisdiction.
