Coinbase shifts New York prediction lawsuit to federal court

Coinbase removed a lawsuit filed by New York Attorney General Letitia James from state court to federal court on Wednesday, saying the dispute turns on federal questions about how event contracts are regulated and whether federal law preempts state gambling rules.

James filed the suit on Tuesday against Coinbase Financial Markets and Gemini Titan. The complaint alleges the platforms offer prediction markets that violate New York gambling law by allowing users to wager on sports, entertainment and elections without a state gaming license and by permitting users aged 18 to 20 to participate. It seeks fines, forfeiture of alleged illegal profits, restitution for customers and an order blocking the platforms from offering similar products in New York without complying with state requirements.

Coinbase’s chief legal officer, Paul Grewal, wrote on X that the company “has removed this action to federal court,” and that New York’s claims raise “disputed and substantial questions of federal law” subject to “complete preemption.”

Coinbase launched its prediction markets on Jan. 28 and made them available across all 50 U.S. states, including New York. The product lets customers trade contracts tied to real-world outcomes such as political events, sports results and cultural events.

At least 11 states have brought legal actions against prediction market platforms in recent months, asserting state gambling laws and licensing requirements apply. The Commodity Futures Trading Commission contends that event contracts listed on designated contract markets fall under its exclusive authority.

The CFTC has filed lawsuits against gaming regulators in Illinois, Connecticut and Arizona and, with the U.S. Department of Justice, asked a federal court to block Arizona from applying state gambling law to a firm’s event contracts.

The federal court’s decision on whether to keep the case in federal court will determine which regulatory framework applies to prediction markets and what licensing or compliance obligations platforms such as Coinbase, Gemini, Kalshi and Polymarket must meet across jurisdictions.