Amid the current generally pro-crypto regulatory atmosphere in the United States, New York State Attorney General Letitia James filed a lawsuit on Tuesday against subsidiaries of two major exchanges, Coinbase Financial Markets and Gemini Titan, alleging that their operation of prediction markets violates New York state laws against illegal gambling.
The complaint states that the two companies did not obtain the necessary licenses from the New York State Gaming Commission to operate prediction markets. James believes that the outcomes of these markets are either beyond the control of bettors or resemble games of chance, and should be considered gambling rather than legitimate market activities. She also alleges that the platforms allow users aged 18 to 20 to participate, while New York state law sets the minimum age for mobile sports betting at 21.
The lawsuit requests the court to order the two companies to return illegally obtained profits and pay civil penalties of three times the profits, as well as compensate customers. Additionally, James seeks to prohibit the two companies from allowing users under 21 to place bets and restrict their marketing methods, including banning promotions on college campuses. Following the announcement, Coinbase's stock price fell by approximately 10% to around $200, while Gemini's stock price dropped by about 4% to below $5.