Crypto Club

Menu
  • Breaking

Grayscale Cuts Coinbase From Its Hyperliquid ETF and Hands Custody to Anchorage

•
April 22, 2026

New York Drops Billion-Dollar Hammer on Coinbase and Gemini Over Prediction Markets

⚖️ The Lawsuits Land in Manhattan

New York Attorney General Letitia James filed two separate lawsuits on April 21, 2026, targeting Coinbase Financial Markets and Gemini Titan for operating what the state calls illegal gambling platforms. Both companies offer prediction markets — platforms where users can wager on the outcomes of sports events, elections, and entertainment results. The AG argues that, regardless of how the companies brand these products, they are running unlicensed gambling operations inside New York’s borders. The suits were filed in Manhattan state court and signal a significant escalation in the ongoing friction between state authorities and the booming prediction market sector. For anyone holding positions in Coinbase or tracking Gemini’s next moves, this is a development worth watching closely.

📋 What the State Says They Did Wrong

The AG’s complaints are specific and layered. Both Coinbase and Gemini are accused of operating prediction market platforms without obtaining a license from the New York State Gaming Commission, which is a legal requirement for any entity accepting wagers in the state. Beyond the licensing gap, the lawsuits allege that both platforms permitted users between the ages of 18 and 20 to place wagers — a direct violation of New York’s 21-and-older minimum age for mobile sports betting. The complaints also accuse both firms of allowing bets on games involving New York college teams, which is separately prohibited under state law. The AG further alleges that by operating outside the licensed system, both companies avoided paying the taxes that legitimate casinos and mobile sports books are required to remit to the state.

💰 The Dollar Figures Are Hard to Ignore

The financial stakes of these lawsuits are substantial. The AG is seeking a minimum of $2.2 billion from Coinbase and a minimum of $1.2 billion from Gemini. The relief sought goes beyond simple fines. The AG is pursuing forfeiture of all illegal profits generated through the prediction market operations, restitution for customers who participated, and civil fines calculated at three times the companies’ alleged illegal proceeds. James has also asked the court to issue orders restricting both platforms from marketing their products to college-age audiences or younger users in New York. These numbers reflect how seriously state officials view the scale of activity on these platforms and how much revenue the AG believes was generated without authorization.

🏛️ Federal Oversight vs. State Law: The Core Fight

Coinbase wasted no time pushing back. Chief Legal Officer Paul Grewal stated publicly that the prediction markets operated by Coinbase are federally regulated national exchanges registered with the Commodity Futures Trading Commission (CFTC), and that Congress intended federal — not state — authority to govern these products. This defense is the same argument that Kalshi, the dominant U.S. prediction market platform, has been making in courts across the country. Federal courts in Nevada and New Jersey have sided with Kalshi, finding that the Commodity Exchange Act preempts state gambling law in those cases. A federal appeals court also sided with Kalshi in April 2026. However, the jurisdictional question remains unsettled, and legal experts widely expect the U.S. Supreme Court to eventually weigh in with a definitive ruling.

📊 The Bigger Prediction Market Picture

The prediction market industry has grown dramatically over the past two years. Kalshi now controls roughly 89% of the U.S. prediction market by volume, having secured its CFTC Designated Contract Market status back in 2020 and won a landmark federal lawsuit in 2024. Polymarket re-entered the U.S. market as a regulated entity in late 2025 after registering with the CFTC in July of that year. What sets Coinbase and Gemini apart in this legal landscape is that neither operates under the same federal DCM designation that Kalshi holds, leaving them more exposed to state-level challenges. Meanwhile, Congress has been examining the sector for insider trading risks, after a series of well-timed bets on political outcomes raised red flags among lawmakers on both sides of the aisle.

🔍 What Investors Should Take From This

New York’s AG has a well-documented track record of following through on crypto enforcement actions. The office previously secured a $50 million settlement with Gemini over its Earn lending product in 2025, resulting in a permanent ban on Gemini offering crypto lending in the state. KuCoin was also targeted for operating without proper registration. The pattern is consistent: the AG identifies an unlicensed activity, pursues aggressive financial penalties, and seeks operational restrictions. For investors, these lawsuits introduce headline and legal cost risk for both Coinbase and Gemini in the near term. Longer term, the outcome of this case — especially if it reaches federal appellate review — could set a precedent that either protects or constrains every platform offering prediction markets to U.S. users. Watch the jurisdictional arguments closely; they will likely determine the future shape of this entire sector.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Cryptocurrency and prediction market investments carry significant risk. Always conduct your own research and consult a qualified financial advisor before making any investment decisions.

Sources:

Related Articles

Sponsored