New York Sues Polymarket U.S. Over Alleged Illegal Gambling

Key Highlights

Less than two months after suing Kalshi, New York is going after Polymarket, claiming the prediction market operator has no authority to accept event contract trades in the state.

New York Targets Polymarket’s U.S. Business

New York Attorney General Letitia James’ office sued Polymarket U.S. on Thursday, accusing the company of running an illegal gambling business in the state. The lawsuit includes a court order provision to block Polymarket operations while also requiring the company to pay fines, forfeit illegal earnings, and award restitution to players. In a statement announcing the lawsuit, Gov. Kathy Hochul said, “Polymarket has done more than just knowingly violate state law; they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming.”

New York’s move against Polymarket is the latest in a series of injunctions against prediction market operators, including the state’s lawsuit against Kalshi in July. The New York AG Office sought to ban Kalshi with that lawsuit and pay back civil penalties up to three times its profits in the state. New York argues that its gambling laws apply to Polymarket and Kalshi, even when federal regulators are involved.

The case contributes to growing tension between state officials and prediction market companies, adding greater complexity to the broader gambling laws affecting sportsbooks and New York online casinos. Prediction markets allow users to trade contracts based on the outcome of future events, including elections, sports, and other topics. While the companies describe these products as federally regulated financial contracts, some states view them as a form of gambling that must follow local gaming laws.

Polymarket Fights Back in Court

Polymarket responded hours later by filing its own lawsuit against New York. The company argues that the state is going beyond its legal authority because Polymarket’s U.S. operations are overseen by the U.S. Commodity Futures Trading Commission (CFTC). According to the complaint, federal law gives the CFTC authority over prediction markets and limits what states can do.

Polymarket Chief Legal Officer Neal Kumar said the company had tried to work with New York officials before the lawsuit was filed. He also pointed out that Polymarket was founded in a small New York City apartment and now employs more than 350 people in the state. Kumar said the company plans to fight the case and defend its users.

In its complaint, Polymarket said New York’s actions are part of a larger effort by states to challenge the CFTC’s authority. The company argues that allowing states to regulate federally supervised prediction markets could create conflicting rules across the country. Minnesota banned prediction markets in July, which also prompted a CFTC countersuit before the ban was blocked by a federal judge.

Federal & State Rules Clash

The lawsuits are part of a wider legal fight over who controls prediction markets in the United States. The CFTC treats prediction markets as derivatives exchanges under federal law, while several states argue that certain contracts fall under state gambling rules. That difference has created lawsuits involving companies, regulators, and state governments.

The Supreme Court has also been asked to consider the dispute, highlighting the scale of the issue as prediction markets continue to grow. For now, there is no single nationwide answer on how far states can go when regulating these platforms. The New York case could become another major test of the balance between federal financial rules and state gambling laws.