New York Attorney General Letitia James sued crypto exchanges Coinbase and Gemini on Tuesday, accusing them of operating prediction markets that violate state gambling laws, according to The Wall Street Journal. 

The lawsuits target the companies’ “event contract” offerings, which let users place yes-or-no wagers on outcomes ranging from economic developments to election results, with the state arguing that each contract amounts to a bet, the Journal reported. 

The complaints do not target well-known prediction-market operators but could serve as test cases in a broader legal battle over whether states or federal regulators control the platforms, the newspaper said. The Commodity Futures Trading Commission has said it regulates prediction-market operators, a position that has allowed the companies to bypass state gambling regulators that collect taxes, according to the report. 

James’s actions mark an escalation in New York’s fight with the industry, according to the WSJ. Last year, Kalshi sued the New York State Gaming Commission after receiving a cease-and-desist letter, arguing that the state lacked authority to regulate it. That case remains ongoing, the report said.

The new suits against Coinbase and Gemini allege the platforms illegally allow people under 21 to gamble, which New York law prohibits, and also violate state restrictions on betting involving New York college teams, the Journal reported. 

James’s office said in a statement that Coinbase and Gemini were avoiding the tax obligations imposed on licensed casinos and mobile sports-betting operators, according to the Journal. The report said New York collected more than $1 billion in mobile gambling tax revenue in 2024.

New York is seeking fines equal to three times the companies’ profits in the state, restitution for harmed customers, and penalties of $100,000 for each offer or attempted offer of unauthorized sports wagering or mobile sports wagering in New York, the news outlet said.

Read more at The Wall Street Journal