TL;DR
- New York Attorney General Letitia James sued both Coinbase and Gemini on April 21, 2026, for illegal gambling through their prediction markets
- The state is demanding at least $2.2 billion from Coinbase and $1.2 billion from Gemini
- Both exchanges operate with CFTC approval at the federal level and deny the allegations
- The case is part of a broader legal conflict between federal and state regulators over who has jurisdiction over prediction markets
New York Declares War on Crypto Exchanges' Prediction Markets
New York Attorney General Letitia James took a powerful step on April 21, 2026, when she filed lawsuits against two of the largest crypto exchanges in the US – Coinbase and Gemini – for their respective prediction market products. According to the lawsuits, the platforms are considered to be operating illegal gambling in the state without the necessary permits from the New York State Gaming Commission.
Coinbase and Gemini's so-called prediction markets are nothing more than illegal gambling operations, according to Attorney General Letitia James.
The Attorney General demands that both companies repay profits, pay fines, and provide compensation to affected customers. The total claim is for a minimum of $3.4 billion – $2.2 billion from Coinbase and $1.2 billion from Gemini – according to documents cited by Decrypt.
What Exactly Are Prediction Markets?
Prediction markets allow users to trade contracts based on the outcome of future events – everything from elections and sports results to macroeconomic indicators. The market has exploded in scope: according to research material, open interest in crypto prediction markets reached $1 billion in February 2026, and monthly volume exceeds $27 billion.
Coinbase launched its prediction market in late 2025, while Gemini rolled out «Gemini Predictions» in December 2025 after a five-year approval process with the federal commodity regulator CFTC. Both companies thus operate with federal permits – which is at the core of the legal dispute.
Federal Approval Versus State Gambling Law
Coinbase reacted quickly to the lawsuit. The company's Chief Legal Officer Paul Grewal maintained to Decrypt that prediction markets are national exchanges registered under the CFTC, and that the company will continue to fight for federal regulation as the framework.
This position is not without precedent. In April 2026, the US Court of Appeals for the Third Circuit issued a ruling in favor of competitor Kalshi, which also operates prediction markets under CFTC authorization. The court ruled that Kalshi's contracts are to be considered «swaps» subject to CFTC jurisdiction, thereby blocking New Jersey from enforcing state gambling laws against the platform.
Nevertheless, the picture is not unambiguous. A federal court in Nevada has previously concluded that state gambling rules may apply, and New York's lawsuit brings forth an additional argument: the platforms allow access for users between 18 and 20 years old, below the state's age limit of 21 for mobile sports betting.
Gemini Under Pressure – Despite Long Regulatory Process
For Gemini, which has emphasized its «ask for permission, not forgiveness» philosophy, the lawsuit is a clear setback. The company spent five years obtaining CFTC approval and launched its prediction market platform in all 50 states in December 2025. Gemini is also in a challenging financial period: the company reported a net loss of nearly $589 million for 2025, up from $151 million in 2024, even though Q4 revenues set a record at $60.3 million.
What Happens Next?
The legal battle over prediction markets in the US is far from over. The CFTC itself has filed lawsuits against the states of Arizona, Connecticut, and Illinois to defend its exclusive jurisdiction, and several major decisions in federal courts are expected in 2026 and 2027.
For Coinbase and Gemini, this is about more than one state. Prediction markets are a central part of both companies' strategies to diversify revenues beyond traditional spot trading. According to research material, over $44 billion was traded on prediction markets in 2025, with estimates that the volume could exceed $325 billion in 2026. These are large sums to fight over – and New York has now made it clear that the state does not intend to stand on the sidelines.
