The U.S. state of Nevada is moving to tighten its regulatory oversight over Web3 firms. In the last two weeks, Nevada’s gaming regulator has filed lawsuits against Coinbase and Polymarket calling their prediction market offerings as “unlicensed betting”.
Prediction markets like Polymarket and Kalshi are platforms that allow users to bid on the potential outcome of future events. Participants on this platforms buy and sell smart contracts priced within the range of $0 to $1 where in — $0.6 represents 60 percent chance of something happening and $1 equates to a 100 percent chance. The smart contracts that represent the bets pay $1 for right predictions and $0 for wring ones.
While Prediction markets have bounced to popularity in recent times, regulatory guardrails around them are unclear.
Coinbase lawsuit in Nevada
The Nevada Gaming Control Board (Board) on Monday, filed a civil enforcement action against Coinbase in the District Court for Carson City.
The filing has asked the court to order Coinbase to halt offering unlicensed wagering (betting) in Nevada as it violates the state law. It says that.
“Coinbase offers products referred to as event contracts for sale on its mobile app, which are made available to people in Nevada. The Board considers offering sports event contracts, or certain other event contracts, to constitute wagering activity under NRS 463.0193 and 463.01962 and, therefore, entities offering such event contracts must be licensed,” the filing said.
Mike Dreitzer, the chairman of the Nevada Gaming Control Board said that the move is to ensure that Nevada state’s gaming community is protected against financial threats.
Source: Nevada Gaming Control Board
Coinbase’s foray into the prediction markets is recent. In January, its in-app prediction market feature went live, in partnership with Kalshi. The exchange labels its prediction markets offerings as “federally regulated financial derivatives” and refutes from tagging them as state-level gambling.
For now, it remains unclear if Coinbase has indeed restricted its prediction markets services in the state.
Nevada’s attack on Polymarket
Similar to Coinbase, a lawsuit has been filed against Polymarket as well by Nevada’s gaming authority.
“Nevada’s public policy, as expressed by the Legislature, is that the gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants and therefore must be licensed, controlled, and assisted to protect the public health, safety, morals, good order, and general welfare of the inhabitants of the State,” the lawsuit noted.
The next steps in these cases remain unclear for now.
It is, however, noteworthy that the lack of regulatory clarity around prediction markets, these platforms have started to face scrutiny.
In recent days, Polymarket was banned in Portugal and Ukraine over gambling concerns and licencing issues.