New York Sues Coinbase and Gemini Over Prediction Markets — But Not Kalshi. Here's Why.

New York Attorney General Letitia James filed civil lawsuits on April 21, 2026 against Coinbase Financial Markets, Inc. and Gemini Titan LLC, seeking at least $3.4 billion in combined penalties for what the state calls illegal gambling operations run through their prediction market platforms. Filed in Manhattan Supreme Court, the actions mark New York's first direct enforcement strike against prediction market operators — and raise an immediately obvious question: why were Coinbase and Gemini named, but not Kalshi, the country's largest prediction market exchange?

The answer reveals as much about legal strategy as it does about regulation itself.

What New York Is Alleging

The AG's complaints rest on three core arguments, laid out in the official New York AG press release filed April 21.

Unlicensed gambling. New York defines gambling as allowing someone to stake or risk money on the outcome of a contingent event outside their control. Both Coinbase and Gemini allow users to trade on outcomes ranging from sports results to elections to entertainment awards. Neither company holds a license from the New York State Gaming Commission.

Underage access. New York requires mobile sports betting participants to be at least 21 years old. Both platforms allowed New Yorkers as young as 18 to participate.

Tax evasion through regulatory arbitrage. Licensed gambling operators in New York — casinos, mobile sportsbooks — pay approximately 51% of gross gaming revenues to the state, per the AP's reporting. By bypassing the licensing system, Coinbase and Gemini avoided this obligation while competing in the same consumer market.

Attorney General James is asking the court to require both companies to forfeit illegal profits, pay civil fines equal to three times those profits, and provide restitution to affected customers. She is also seeking to bar marketing on college campuses and prohibit users under 21 from accessing the platforms. New York is seeking at least $2.2 billion from Coinbase and at least $1.2 billion from Gemini, according to Forbes.

"Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution," AG James said in her statement.

One element that gives New York's suits unusual reach: under New York's disgorgement statutes, the state can seek recovery of company profits earned nationwide — not just revenue attributable to New York users. That's a substantially larger number than what most state enforcement actions could target.

Why Kalshi Wasn't Named

This is the structural story behind the headline.

Kalshi — a CFTC-designated contract market (DCM) and clearing organization (DCO) — received a cease-and-desist letter from the New York State Gaming Commission on October 24, 2025. Kalshi's response was immediate and procedurally aggressive: two days later, on October 27, 2025, it filed a preemptive federal lawsuit against the Gaming Commission in the U.S. District Court for the Southern District of New York. The case is KalshiEX LLC v. Williams, No. 1:25-cv-08846 — still active in federal court, per Bloomberg Law.

In that lawsuit, Kalshi argues the Commodity Exchange Act gives the CFTC exclusive jurisdiction over derivatives traded on federally regulated exchanges, preempting any state gambling law from applying to its contracts. By filing in federal court before New York could sue in state court, Kalshi created an active federal preemption case — one that makes the AG's path to a state court action against Kalshi far more legally complicated.

Coinbase and Gemini used a different strategy. Coinbase filed preemptive lawsuits in Connecticut, Michigan, and Illinois in December 2025 — but not in New York. Gemini filed no preemptive suits against New York at all. Without an active federal case protecting them in the Empire State, both platforms left a gap the AG walked through.

The result: Kalshi's legal maneuvering in October 2025 effectively granted it a procedural shield that its competitors didn't build in New York.

How the Platforms Are Structured

The two defendants are structurally different, and understanding that distinction matters for evaluating the lawsuits.

Coinbase Financial Markets, Inc. is a CFTC-registered futures commission merchant (FCM) and NFA member — not a designated contract market itself. Coinbase's prediction market trades route to KalshiEX's underlying exchange. Coinbase is functioning as a brokerage front-end, bringing its large user base to Kalshi's matching engine. Coinbase launched its prediction market product in January 2026.

Gemini Titan LLC is a CFTC-designated contract market in its own right, receiving that designation on December 10, 2025 under then-Acting CFTC Chair Caroline Pham, as reported by Reuters. Gemini Predictions launched in December 2025. That makes Tuesday's New York suit the first state enforcement action against a CFTC-approved DCM that was explicitly designated for event contracts under the current regulatory administration.

That distinction is legally significant. Kalshi's entire preemption defense rests on its DCM designation. Gemini Titan has the same designation. But having a legal argument and having it resolved by a court are different things — and Gemini hasn't been to court in New York yet.

Coinbase Responded; Gemini Didn't

Coinbase Chief Legal Officer Paul Grewal was direct. "Prediction markets are federally regulated national exchanges, registered with the CFTC," Grewal said, according to Reuters. "This issue is proceeding in New York federal court as we speak. Coinbase will continue to fight for the federal oversight of these markets that Congress intended."

Gemini had no comment.

Grewal's reference to existing New York federal proceedings is instructive. There are currently multiple active federal cases in the Southern District — including the Kalshi preemption suit — that turn on the same legal question New York's state court complaints raise. By pressing its case in state court, New York risks an eventual federal preemption ruling that retroactively undermines the state suits. By fighting in federal court, Coinbase is trying to shift the terrain to where its legal theory is strongest.

Where the CFTC Stands

The federal regulator has not been a neutral bystander. CFTC Chairman Mike Selig has publicly argued that prediction markets — including sports-related event contracts — fall under the CFTC's exclusive jurisdiction, per CNBC. The CFTC has filed suits against Arizona, Connecticut, and Illinois to block those states from enforcing gambling laws against prediction market providers. In mid-April, a federal judge granted an emergency TRO halting Arizona's regulatory actions, finding the CFTC had demonstrated a reasonable chance of success on the preemption argument.

New York's lawsuits put the CFTC in a familiar position: either file to block New York (as it did in three other states) or let the suit proceed and risk a state court ruling that undermines its exclusive-jurisdiction claim. If the CFTC moves to join the New York litigation, it would mark the fourth state where the federal agency has directly opposed state enforcement.

The Third Circuit Has Already Weighed In — Sort Of

In early April, the Third Circuit Court of Appeals ruled in favor of prediction markets in New Jersey, holding that federal law preempts state gaming regulations for contracts listed on a CFTC-designated exchange. That ruling is directly relevant to the question New York's lawsuits raise — but it's not binding on New York state courts, and it's not binding on the Second Circuit if this reaches federal appellate review.

The Ninth Circuit heard oral arguments in California in mid-April and appeared more skeptical of the preemption theory. That circuit split — combined with New York's entry as a new enforcement front — significantly increases the likelihood the Supreme Court grants certiorari to resolve the question definitively.

What This Means for New York Users

If you are a New York resident using Coinbase's prediction market product or Gemini Predictions, nothing changes immediately. Both platforms continue operating while the lawsuits work through the courts. These are civil enforcement actions seeking monetary damages — not emergency injunctions halting operations. Forcing the platforms to stop serving New York users would require a separate injunction motion.

Coinbase prediction markets are currently available in 49 states. Nevada is separately restricted following a federal preliminary injunction granted March 26, 2026. As of this writing, no New York access restriction is in place from either company.

What could change sooner: given New York's nationwide disgorgement theory, both companies may voluntarily restrict New York access to limit their legal exposure. Coinbase's active federal suits in Connecticut, Michigan, and Illinois serve as a model — a platform can simultaneously fight a preemption case in federal court and restrict state-level access as a practical matter. Neither company has announced plans to restrict New York access.

Why New York's Entry Matters Beyond the Dollar Figures

The $3.4 billion figure is striking, but New York's significance in this fight goes beyond damages.

New York is the home state of most of the industry's major entities. Kalshi is based in Manhattan. Gemini is headquartered in New York. Coinbase Financial Markets operates from New York. The New York Gaming Commission issued the industry's first major cease-and-desist (to Kalshi in October 2025). And New York's Attorney General has a demonstrated track record of using disgorgement theory aggressively against financial firms — a pattern established long before prediction markets entered the picture.

The states that have sued or sought enforcement against prediction markets previously — Arizona, Connecticut, Illinois, New Jersey, Nevada, Tennessee, Ohio, Massachusetts, Washington — are significant. But New York carries disproportionate legal, financial, and symbolic weight. Its entry signals this fight is escalating, not winding down.

And it confirms what legal observers have said for months: this question — does the Commodity Exchange Act preempt state gambling laws for CFTC-designated exchanges? — is headed to the Supreme Court.

FAQ

Are Coinbase and Gemini prediction markets currently legal in New York?

Both companies operate with federal regulatory authorization — Coinbase as a CFTC-registered FCM, Gemini Titan as a CFTC-designated contract market. New York's lawsuit alleges state law applies regardless. No court has adjudged either platform illegal. Both are currently operating in New York while the lawsuits proceed.

Why wasn't Kalshi sued by New York?

Kalshi preemptively sued the New York State Gaming Commission in the U.S. District Court for the Southern District of New York on October 27, 2025 (case No. 1:25-cv-08846), before New York could file against it. That active federal case creates procedural complexity for a state court action. Coinbase and Gemini did not file preemptive suits in New York, leaving that path open to the AG.

What does the 51% gross gaming revenue tax mean for prediction markets?

New York taxes licensed sportsbooks at approximately 51% of gross gaming revenue. Licensed operators pay this tax as part of the social compact embedded in gambling licenses — funding problem gambling treatment and public schools. By operating without licenses, Coinbase and Gemini avoided this tax while competing for the same users as licensed operators, per the AG's complaint.

Could New York's lawsuit block access to Coinbase or Gemini prediction markets?

Not automatically — these suits seek money damages, not emergency injunctions. The AG would need to separately file for an injunction to halt access. Both platforms remain available to New York users as of this writing. Voluntary access restrictions to limit legal exposure remain possible but unannounced.

What does New York's "nationwide disgorgement" power mean?

Under New York state law, the AG can seek to recover profits a company earned from illegal activity across the entire country — not just revenue from New York users. That dramatically expands the potential damages exposure compared to most state enforcement actions.

The Bottom Line

New York's suits against Coinbase and Gemini are the highest-stakes state enforcement actions yet in the prediction market legal battle — driven less by dollar figures than by New York's unique legal muscle, its nationwide disgorgement authority, and its status as the industry's home base. Kalshi's October 2025 preemptive filing is the reason it isn't in the dock alongside its competitors. For Coinbase and Gemini, the lesson is the same one Kalshi learned first: in New York, you file preemptively or you get filed against.

The jurisdictional question — who regulates prediction markets, the CFTC or the states? — is now before more courts than ever. The Supreme Court is the next logical stop.

For the latest on prediction market regulation across all 50 states, see our complete guide at PredictionMarkets.US.

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Sources & Verification

• NY AG civil suits against Coinbase and Gemini (April 21, 2026): New York Attorney General official press release — verified April 22, 2026
• $2.2B from Coinbase / $1.2B from Gemini damages figures: Forbes (Ron Shevlin) — verified April 22, 2026
• AG James quotes, 51% tax rate, age 21 minimum, Manhattan Supreme Court filing: Associated Press (Michael R. Sisak) — verified April 22, 2026
• Coinbase CLO Paul Grewal response: Reuters — verified April 22, 2026
• Entity names, treble damages, college campus ban: CNBC — verified April 22, 2026
• Kalshi preemptive SDNY lawsuit (KalshiEX LLC v. Williams, No. 1:25-cv-08846): Bloomberg Law — verified April 22, 2026
• Gemini Titan LLC CFTC DCM designation (December 10, 2025): Reuters — verified April 22, 2026
• CFTC AZ/CT/IL enforcement suits, CFTC Chairman Mike Selig exclusive jurisdiction: CNBC, Associated Press — verified April 22, 2026