New York Sues Polymarket, Accusing Prediction Market of Illegal Gambling

New York Takes Legal Action Against Polymarket

New York Attorney General Letitia James and Governor Kathy Hochul jointly filed a lawsuit on Thursday against Polymarket, a crypto-based prediction market platform, alleging it operates an unlicensed gambling operation within the state. The legal action marks the latest escalation in New York’s broader enforcement campaign against gambling-adjacent digital platforms and highlights a deepening jurisdictional conflict between state regulators and federal agencies over the classification and oversight of event-contract markets.

According to the complaint, an investigation by the Attorney General’s office concluded that Polymarket’s markets satisfy New York’s legal definition of gambling because users stake money on uncertain outcomes they cannot control. The suit asserts that Polymarket never obtained a license from the New York State Gaming Commission, enabling the platform to avoid the taxes that licensed casinos and mobile sportsbooks pay—revenue that helps fund public schools, youth sports programs, and problem gambling treatment services.

Regulatory Turf War Intensifies

The lawsuit arrives amid an active debate among federal regulators regarding the proper framework for crypto-powered prediction markets. Polymarket and its rival Kalshi maintain they are not gambling sites but rather federally regulated exchanges offering “event contracts,” a type of derivative that would place them under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state gaming laws. The CFTC has sided with the platforms; in 2026 it sued nine states arguing that it should possess exclusive nationwide authority over the industry.

Thursday’s complaint also alleges that Polymarket permits users aged 18 to 20 to access its platform, while New York law requires mobile sports bettors to be at least 21 years old. “By skirting New York’s laws, Polymarket is targeting the most vulnerable,” James said. Hochul added that the company had “knowingly” violated state law and put underage users at risk.

Remedies Sought and Enforcement Pattern

The state is asking a court to bar Polymarket from operating as an unlicensed gambling business in New York. It also seeks disgorgement of the company’s alleged illegal gains, restitution for harmed users, and fines equal to three times those gains. The action follows a pattern of recent enforcement by New York authorities: James and Hochul sued rival prediction market Kalshi in July, and James sued Coinbase and Gemini in April over similar claims. Earlier this month, James secured an $8 million settlement from the leading operator of sweepstakes casinos.

Polymarket launched in the United States in December 2025, initially allowing users to bet on sporting events with plans to expand into markets covering a wide range of topics. The platform’s rapid growth and the unresolved jurisdictional questions surrounding event contracts suggest further legal and regulatory clashes are likely.

Why This Matters

The Polymarket lawsuit crystallizes a pivotal policy dispute: whether prediction markets constitute gambling subject to state licensing and consumer-protection regimes, or financial derivatives subject to exclusive federal oversight by the CFTC. The outcome will shape market access, tax revenue allocation, and consumer safeguards—particularly for younger users—across the United States. As New York pursues parallel actions against Kalshi, Coinbase, and Gemini, the state is signaling a coordinated strategy to assert its authority over crypto-adjacent wagering platforms, setting the stage for court rulings that could define the regulatory perimeter for years to come.

Frequently Asked Questions

What specific laws does New York allege Polymarket violated?

The state contends Polymarket meets New York’s legal definition of gambling because users stake money on uncertain outcomes they cannot control, and that the platform operated without a license from the New York State Gaming Commission, evading taxes and allowing users aged 18–20 to participate despite a statutory minimum age of 21 for mobile sports betting.

How does this case relate to the CFTC’s position on prediction markets?

The CFTC argues it holds exclusive federal authority over event-contract markets and has sued nine states to enforce that view. Polymarket and Kalshi claim their products are federally regulated derivatives, not gambling, creating a direct conflict between state enforcement actions and federal regulatory policy.

What remedies is New York seeking in the lawsuit?

The state requests a court order barring Polymarket from operating as an unlicensed gambling business in New York, disgorgement of alleged illegal gains, restitution for harmed users, and civil penalties equal to three times those gains.