New York Attorney General, Letitia James, has sued prediction-market operator, Polymarket, accusing the company of running an illegal gambling operation in the state and escalating a broader U.S. fight over whether prediction markets should be regulated as financial markets or gambling businesses.
The lawsuit alleges that Polymarket offered New York residents event contracts on sporting events without obtaining a license from the state’s Gaming Commission. The state said the contracts meet the legal definition of gambling because their outcomes are uncertain and outside the control of bettors.
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New York is seeking to stop Polymarket from operating as an unlicensed gambling business as well as the forfeiture of alleged illegal gains, restitution for affected users, and fines equal to three times the gains the company made through the alleged violations.
“By running an unlicensed gambling operation, 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,” Governor Kathy Hochul said in a press release announcing the lawsuit.
Polymarket is “sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do,” New York said.
“This tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment.”
Polymarket launched its U.S. platform in December 2025, initially offering contracts tied to sporting events before expanding into other markets. New York’s action follows a similar lawsuit against rival prediction-market operator, Kalshi, in July 2026 as well as cases involving prediction-market businesses operated by Coinbase and Gemini.
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Polymarket filed its own lawsuit against James and other New York officials seeking to block state regulation of its prediction markets. The company argues that the U.S. Commodity Futures Trading Commission (CFTC) has exclusive authority over the contracts.
The dispute reflects a widening conflict between state regulators and federal authorities over the legal status of prediction markets. The CFTC has asserted federal authority over the sector while several states have argued that contracts allowing users to wager on sports and other events fall within state gambling laws.
The competing lawsuits could add to a growing split among U.S. courts over which level of government has authority over prediction markets, potentially setting up a Supreme Court decision on the industry’s regulatory framework.
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