New York Sues Coinbase Over Prediction Markets, COIN Stock Falls 7%

New York’s Attorney General (AG) Letitia James has sued Coinbase, alleging that the crypto exchange’s prediction markets violate state law. The COIN stock has fallen amid this development, in that it is the latest state crackdown on prediction markets over claims that they operate illegal gambling.

New York Sues Coinbase For State Violation

According to a Reuters report, New York has sued Coinbase, along with fellow crypto exchange Gemini, alleging that their prediction markets violate state laws against illegal gambling. The Attorney General said the complaints that the crypto exchange failed to obtain the required license to operate sports and election prediction markets.

James argued that these prediction markets fit the state’s legal definition of gambling since the bettors cannot determine the outcomes, and that the markets amount to games of chance. The New York AG also alleged that Coinbase allowed 18- to 20-year-olds to use its platforms, although state laws set 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 said. The New York AG has filed a motion for a temporary restraining order and a preliminary injunction against the top crypto exchange. The state is seeking damages, civil fines, restitution, and permanent injunctive relief.

Additionally, she has asked the court to ban Coinbase from allowing users under 21 to bet on these markets and from advertising its platforms on college campuses. The COIN stock has fallen amid this development. The crypto stock is currently trading at around $196, down over 6% from an intraday high of around $210, according to TradingView data. The stock is notably down 13% year-to-date (YTD).

Kalshi May Be Joined To The Suit

Legal expert Daniel Wallach noted that Kalshi is likely next after the lawsuit against Coinbase and Gemini. He explained that New York hasn’t sued the prediction markets platform because of the pending motion for a preliminary injunction seeking to bar the AG from filing civil or criminal enforcement proceedings against Kalshi.

“If the SDNY denies that motion, Kalshi is next,” he said. It is worth noting that prediction markets continue to face crackdown from states over the claim that these platforms operate an illegal gambling site. The CFTC has already sued three states in a bid to affirm its exclusive jurisdiction over these platforms.

Amid this crackdown, prediction markets are lobbying for regulations that protect them against them. According to Bloomberg data, Kalshi and other platforms like Coinbase that have launched their prediction markets have spent a record $1.84 million on lobbying in their first quarter of this year, up 60% year-over-year (YoY).