Hassan Maishera
TL;DR
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New York has sued Polymarket, alleging that the prediction market operates unlicensed gambling in the state.
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Attorney General Letitia James and Governor Kathy Hochul say the platform puts consumers, including minors, at risk.
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The state wants Polymarket blocked from operating and advertising in New York until it obtains the required registration.
New York has filed a lawsuit against Polymarket, accusing the prediction market platform of offering illegal gambling products and asking a court to block it from operating in the state.
Attorney General Letitia James and Governor Kathy Hochul announced the case Thursday, alleging that Polymarket avoided New York’s licensing, consumer-protection and tax requirements.
The lawsuit adds to an expanding conflict over whether event-contract platforms should be regulated as federally supervised derivatives markets or treated as gambling businesses subject to state law.
Polymarket said it has been communicating with New York officials and intends to maintain its presence in the state.
New York Says Polymarket Offers Unlicensed Gambling
New York prosecutors argue that contracts available through Polymarket satisfy the state’s legal definition of gambling.
Prediction markets allow users to trade contracts tied to the outcome of future events. Prices generally reflect participants’ assessment of the probability that an event will occur, and winning contracts settle at a predetermined value.
Supporters describe these products as information markets or event contracts, while critics argue that staking money on uncertain outcomes amounts to betting.
New York takes the latter position in its lawsuit. The state alleges that Polymarket must obtain authorization from the New York State Gaming Commission before offering its products to residents.
“By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support,” James said.
The allegations have not yet been decided by a court. Polymarket will have an opportunity to respond and challenge the state’s interpretation of its products and jurisdiction.
Officials Raise Concerns About Underage Users
Hochul said the platform’s alleged failure to comply with state gambling rules placed New Yorkers at risk, particularly minors and people vulnerable to problem gambling.
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law,” Hochul said. “They have put New Yorkers at risk, especially those underage who are most vulnerable to problem gambling.”
Regulated gambling companies are generally required to maintain age-verification systems, responsible-gaming protections and procedures for identifying potentially harmful behavior.
New York’s complaint will likely examine whether Polymarket’s customer controls provide protections equivalent to those required from licensed gaming operators.
The state did not identify specific instances of minors using the platform in the information provided. Its case instead argues that operating outside the established licensing framework deprives users of safeguards imposed on authorized businesses.
Polymarket has not publicly responded in detail to the underage-gambling allegations.
New York wants the court to order Polymarket to stop conducting business in the state until it obtains the registrations officials say are legally required.
The requested injunction would also cover advertising directed at New York residents. If granted, the restriction could prevent Polymarket from promoting or offering its event contracts within the state.
Officials are also seeking $100,000 and additional fines or financial remedies.
The complaint accuses Polymarket of avoiding taxes imposed on regulated gambling operators. New York says those revenues fund public schools, youth sports and programs providing education and treatment for problem gambling.
The lawsuit does not mean Polymarket will immediately cease operating. The court must first consider the state’s claims, the company’s defenses, and any requests for temporary restrictions while the case proceeds.
Polymarket could argue that its contracts fall under federal commodities law rather than state gaming statutes, an issue central to similar disputes involving other platforms.
Lawsuit Expands State-Federal Prediction Market Dispute
New York’s case follows legal action against Kalshi in July based on similar allegations.
Massachusetts, Baltimore, Connecticut, Michigan, and Rhode Island have also pursued cases involving Kalshi and Polymarket. These lawsuits form part of a wider contest over which level of government has authority over prediction markets.
Platforms offering event contracts have argued that federal regulation by the Commodity Futures Trading Commission can preempt state gambling laws.
States contend that contracts involving sports or other wager-like events remain subject to their gaming regulations regardless of federal oversight.
A federal appellate ruling in a Nevada dispute recently created another setback for arguments that the CFTC has exclusive jurisdiction over all such products.
The outcome of these cases could determine whether prediction market platforms need separate gaming licenses in multiple states or can operate nationally under a federal framework.
A state-by-state system could significantly increase compliance costs and limit the contracts available in certain jurisdictions. A federal-only model would reduce that fragmentation but could restrict states’ ability to apply their gambling and consumer-protection laws.
Polymarket Says It Will Remain in New York
Polymarket Chief Legal Officer Neal Kumar said the company has been working with New York officials to address their concerns.
He emphasized Polymarket’s ties to the state, noting that the business was founded in a small New York City apartment and now employs more than 350 people there.
“We believe in New York and we’re staying here,” Kumar said.
His response signals that Polymarket plans to contest the allegations rather than withdraw voluntarily. The company did not explain whether it would seek a gaming license or modify its offerings while the lawsuit is pending.
The case presents a significant challenge because New York is both an important financial center and one of the most active state regulators of cryptocurrency and online gambling.
A ruling in the state’s favor could encourage additional jurisdictions to pursue similar actions. A successful Polymarket defense could strengthen the industry’s argument that event contracts belong primarily within the federal derivatives framework.
Until a court resolves the dispute, the legal classification of Polymarket’s contracts—and the company’s authority to offer them in New York—remains contested.
