Coinbase, Gemini Sued Over Alleged Illegal Gambling

▲ Coinbase, Exchange/AI-generated image ©

The largest cryptocurrency exchanges in the U.S. have simultaneously become embroiled in lawsuits over alleged 'illegal gambling,' bringing regulatory risks back to the forefront of the market.

According to the investment media outlet FXStreet on April 22 (local time), New York Attorney General Letitia James filed a lawsuit against Coinbase and Gemini for allegedly operating an unlicensed prediction market. The claim is that the two exchanges promoted illegal gambling by offering services that allow betting on the outcomes of future events without a license.

According to the complaint, both companies allegedly provided services to users under the age of 21, the minimum age set by New York State law, and even allowed betting related to New York university sports teams. Furthermore, a key issue raised is that they continued operations without obtaining the necessary permits from the New York State Gaming Commission.

Prosecutors argue that these services generated profits while evading tax obligations that would otherwise fund public programs. They particularly emphasized the risks, citing research that shows exposure to gambling among youth can lead to mental health and financial problems. Accordingly, authorities are demanding disgorgement of unjust profits, compensation for victims, and fines up to three times the amount for both companies.

Meanwhile, Coinbase separately announced that it has ceased trading some perpetual futures products and automatically settled all open positions. The exchange stated that this measure is aimed at focusing on products that meet liquidity and market quality standards, adding that it is restructuring its derivatives offerings.

This lawsuit indicates a renewed intensification of the conflict surrounding the scope of services provided by cryptocurrency exchanges and regulatory boundaries. Particularly, as prediction markets and derivatives are increasingly likely to move out of regulatory blind spots and become subject to full oversight, widespread repercussions are expected across the industry.

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