New York targets major exchange prediction markets

TLDR

New York has escalated its crackdown on crypto-based prediction markets by suing Coinbase and Gemini over allegedly illegal gambling products and tightening rules on how such markets can operate.

1. New Yorks attorney general sued Coinbase and Gemini for running unlicensed gambling via prediction markets and is seeking about $3.4 billion in penalties and disgorgement.
2. New York is also banning state employees from using insider information on prediction markets and pressuring CFTC?registered platforms like Kalshi, treating most event contracts as state?regulated gambling.
3. Crypto exchanges and prediction protocols now face higher US legal risk, so users should expect more geofencing, product changes, and court fights over whether these markets are derivatives or gambling.

Deep Dive

1. Lawsuits Against Coinbase And Gemini

New York Attorney General Letitia James filed lawsuits in April 2026 against Coinbase and Gemini, accusing their prediction market products of operating as illegal gambling platforms without state licenses and seeking roughly $3.4 billion in combined sanctions and disgorgement from the two firms prediction market units. These suits argue that crypto-based contracts letting users wager on real?world outcomes are gambling, not regulated financial instruments, when offered without New York gaming approval, and could force shutdown of prediction products for New York users if successful, according to the filed lawsuits in April 2026 against Coinbase and Gemini.

The complaints come after both exchanges expanded prediction offerings, partly in response to growth on platforms like Polymarket, and signal that New York wants large, brand?name exchanges held to the same gambling rules as traditional betting operators.

2. Executive Orders And Kalshi Pressure

Separately, New York Governor Kathy Hochul signed Executive Order 60 in April 2026, banning covered state employees from using nonpublic government information to profit or avoid losses in prediction markets or to help others do so. The order defines many prediction platforms as exchange?traded markets that are not licensed by the New York State Gaming Commission and links them to corruption risks.

New York regulators previously sent CFTC?regulated platform Kalshi a cease-and-desist letter alleging it was effectively an unlicensed mobile sports wagering operator, while Kalshi also fights a Nevada case over whether its event contracts are unlicensed gambling. This shows New York targeting both major crypto exchanges and specialist prediction venues under a common gambling framework.

3. Industry Impact And Next Steps

For exchanges, the big risk is that prediction markets are classified as gambling at the state level rather than as federally regulated derivatives, which would require state gaming licenses, strict geofencing, or shutting products in many jurisdictions. The legal landscape is already contested, with the CFTC suing several states, including New York, arguing that federal law gives it exclusive authority over event contracts on registered venues, according to reporting on the CFTC suit against Illinois, New York, and Connecticut.

Conclusion

New Yorks move against Coinbase, Gemini, and other prediction platforms links crypto event markets directly to state gambling law, not just securities or derivatives rules. That raises compliance costs and legal uncertainty for exchanges and protocols offering real?world event markets, and it shifts near?term focus to litigation outcomes and state?by?state rules as key drivers of which prediction products remain accessible to US crypto users.