New York Sues Crypto Exchanges Coinbase and Gemini Over Unlicensed Betting Platforms
New York, Wednesday, 22 April 2026.
New York sued Coinbase and Gemini on April 21, 2026, for operating illegal betting platforms, seeking severe penalties for bypassing state taxes and exposing 18-year-olds to unregulated gambling.
Regulatory Clash Over Event Contracts
New York Attorney General Letitia James filed lawsuits in Manhattan state court on Tuesday against Coinbase Financial Markets, Inc. and Gemini Titan LLC, the parent entities’ prediction market subsidiaries [1][3]. The state alleges that these platforms, which offer wagering on what they term “event contracts,” are operating in “flagrant disregard” of New York’s penal laws and constitution [3]. By functioning without licenses from the New York State Gaming Commission, the cryptocurrency companies are accused of running illegal gambling operations rather than regulated financial markets [1][2].
Evading State Taxes and Youth Protections
The financial implications of operating outside the state’s regulatory framework are substantial. Licensed casinos and mobile sportsbooks in New York are subject to a stringent tax regime, paying approximately 51% of their gross revenues to the state [1]. This effectively leaves licensed operators with 49% of their gross gaming revenue before other operational expenses are factored in [GPT]. By sidestepping the state licensing process, Coinbase and Gemini have avoided these heavy tax obligations, giving them an unregulated financial advantage over compliant gaming entities [1][3].
Severe Penalties and Broader Regulatory Crackdowns
Attorney General James is pursuing aggressive financial penalties to penalize the alleged infractions. The lawsuits petition the court to mandate that both Coinbase and Gemini forfeit all illegal profits and provide restitution to harmed consumers [2][3]. Additionally, the state is seeking punitive fines calculated at three times the amount of profits the companies generated through these unlicensed operations [2]. To continue operating in New York, the firms would be legally compelled to secure proper licensing from the state Gaming Commission [3].
The Federal Versus State Jurisdiction Battle
The core defense for the cryptocurrency exchanges hinges on federal preemption. Coinbase Chief Legal Officer Paul Grewal responded to the lawsuit by asserting that prediction markets function as federally regulated national exchanges under the purview of the Commodity Futures Trading Commission (CFTC) [3]. Grewal emphasized that Coinbase intends to “continue to fight for the federal oversight of these markets that Congress intended,” noting that the jurisdictional dispute is already actively being litigated in federal court [3].