New York Attorney General Letitia James took two of America’s biggest crypto companies to court on Tuesday, filing separate complaints against Coinbase Financial Markets and Gemini Titan in Manhattan. She says both companies are running illegal gambling operations and never bothered to get the proper licenses from the New York State Gaming Commission.

The platforms let users put money on the outcome of events like sports games and elections. James says that it is gambling, plain and simple, no matter what the companies call it. She argued that because bettors have no control over how these events play out, the contracts are no different from placing a bet at a casino.

She also flagged an age problem. Both platforms allow users as young as 18 to participate, but New York law requires anyone placing mobile sports bets to be at least 21.

“Gambling by another name is still gambling, and it is not exempt from regulation under our state laws and Constitution,” James said.

James is asking the court to order both companies to hand back any profits made illegally, pay civil fines worth three times those profits, and repay affected customers. She also wants them barred from accepting bets from anyone under 21 and banned from advertising on college campuses.

Coinbase pushed back quickly. Chief Legal Officer Paul Grewal said the company would keep fighting for federal oversight of these markets, which he said Congress always intended. Gemini did not comment. The company is run by billionaire twins Tyler and Cameron Winklevoss, who serve as chief executive and president, respectively.

Both Coinbase and Gemini launched their prediction market products in mid-December and currently offer them across all 50 states.

A three-way tug of war

The New York lawsuit is just the latest flashpoint in a much bigger fight. The federal Commodity Futures Trading Commission has taken the position that it, not the states, has sole authority over prediction markets.

On April 2, the CFTC went so far as to sue Arizona, Connecticut, and Illinois to stop them from trying to regulate the industry themselves. CFTC Chairman Michael Selig said states were imposing “inconsistent and contrary obligations” on companies that were already operating under federal law, and warned that a patchwork of state rules would ultimately hurt consumers more than protect them.

Four days after those lawsuits were filed, a federal appeals court in Philadelphia sided with prediction market firm Kalshi, ruling that New Jersey gaming regulators had no authority to ban its sports-related contracts. That ruling handed the industry one of its biggest legal wins yet. Still, Nevada managed to secure temporary court orders blocking both Kalshi and Coinbase from operating in the state. Kalshi separately sued New York’s Gaming Commission in federal court in October 2025 to head off any ban there. That case is still ongoing.

Congress is waking up, slowly

On Capitol Hill, lawmakers are scrambling to catch up. At least eight bills targeting prediction markets have been introduced since January.

Several focus on insider trading, a concern that shot up after a Polymarket user reportedly walked away with $400,000 in January by correctly calling the removal of Venezuelan President Nicolas Maduro. Bets placed shortly before U.S. strikes on Iran added more fuel to that fire.

Senator Jeff Merkley of Oregon called prediction markets “a real danger to our democracy and ripe for exploitation by public officials with insider information.” Senator Todd Young of Indiana, one of a handful of Republicans backing regulation, said political considerations should not stop Congress from acting.

But the odds of anything passing soon look slim. Senator Chris Murphy of Connecticut, who co-led a bill to stop government officials from profiting on war and political bets, told reporters in March that the chances of legislation moving this Congress were “slim to none.” He pointed to one reason in particular: the Trump family. Donald Trump Jr. is an unpaid advisor to Polymarket and a paid advisor to Kalshi. The Trump family media company has also announced plans for its own prediction market, called Truth Predict.

The White House denied any conflict of interest. Spokesperson Davis Ingle said the president has been clear that officials should not use nonpublic information for financial gain, and that insider trading is already against the law.

For now, Coinbase and Gemini face a state attorney general who says their products are illegal, while the federal government says states have no business making that call.

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