The Trump administration has taken New York to court as the battle over prediction markets grows uglier, larger and much more political.
The Commodity Futures Trading Commission (CFTC) filed a lawsuit in federal court in Manhattan on Friday, accusing the state of intruding on a market that is under Washington’s control under federal law.
At the heart of the conflict are lawsuits filed by New York Attorney General Letitia James against Coinbase (COIN) and Gemini (GEMI). Letitia says both companies offered prediction market products that should be treated as gambling under state law. According to the CFTC, New York is trying to regulate contracts that are part of the federal commodity derivatives system.
The federal complaint says Letitia’s April 21 lawsuits violate the national framework Congress created for derivatives markets, including event contracts.
The CFTC already filed similar lawsuits against Arizona, Connecticut and Illinois on April 2, so the agency is clearly trying to stop states from building their own walls around prediction markets.
New York leaders defend state gambling laws as CFTC asserts federal power
Letitia and New York Governor Kathy Hochul responded to the lawsuit with a joint statement clearly emphasizing consumer protection. Both Democrats accused President Donald Trump’s Republican administration of “prioritizing big businesses” over residents and customers in New York.
Said:
“New York’s gambling laws are designed to protect consumers, whether they are placing bets on a betting market or in a casino. When gambling platforms, including betting markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”
Prediction markets allow people to bet money on future outcomes. These results may include sports, elections and other public events. The products are based on event contracts where the payout depends on what happens later.
These markets gained much more attention after the 2024 US presidential election campaign, when their live odds were seen as more accurate than the polls before Donald’s victory. This popularity brought more users, more money and more legal pressure.
According to Letitia, Coinbase and Gemini required licenses from the New York State Gaming Commission before they could offer these products in the state. you too described their event contracts as “completely gambling” because users cannot control the end result and some results may depend on chance.
Her office also declined to make both platforms accessible to people ages 18 to 20, while New York requires mobile sports betting customers to be at least 21 years old.
Gemini is led by billionaire twins Tyler Winklevoss and Cameron Winklevoss, with the former serving as CEO and the latter as president. Kalshi filed his own lawsuit against the New York Gaming Commission in October to stop the state from banning event contracts before such a ban could take effect, although that lawsuit is still pending.
Trump is scrutinizing federal employees’ bets after the Polymarket case prompts DOJ charges
The court battle comes at the same time Trump is talking about another risk in prediction markets: government employees using private information to make money. Trump said Thursday that he would investigate federal employees who place bets on event betting sites.
He was asked about the arrest by federal authorities of a U.S. Army soldier linked to an operation involving Venezuelan leader Nicolas Maduro who allegedly won $400,000 as a Cryptopolitan reported previously.
“I’ll look at it,” Trump told reporters. He also said that he never liked the idea of event betting platforms.
“Well, you know, the whole world has unfortunately become something of a casino,” Trump said. “And if you look at what’s happening around the world, in Europe and every place where these bets are made. I’ve never been particularly in favor of it. Conceptually I don’t like it.”
Trump compared the soldier’s case to Pete Rose, the baseball player who was banned for life from sports betting. “Now if he bet against his team, that wouldn’t be good, but he was betting on his own team,” Trump said.
Trump said Pete should be inducted into the Baseball Hall of Fame.
