New York sued Polymarket on Thursday, accusing the prediction market operator of illegal gambling and seeking to shut down its operations in the state, recover its profits and impose financial penalties.
Polymarket fired back hours later, filing its own lawsuit against New York Atty. Gen. Letitia James and state gaming regulators. The company also moved to transfer the state’s case to federal court, where it plans to argue that federal oversight of event contracts supersedes New York’s gambling laws.
The legal showdown follows New York’s similar lawsuit against Kalshi in July, adding to a growing nationwide dispute over whether states or the Commodity Futures Trading Commission have authority to regulate prediction markets and their event contracts trading business.
New York seeks to shutdown Polymarket sports betting
James and Gov. Kathy Hochul announced the lawsuit against QCX LLC, which operates as Polymarket US, alleging the company offers sports betting without a New York State Gaming Commission license.
The state’s 33-page petition argues that Polymarket’s event contracts constitute illegal gambling under New York law because users wager on uncertain outcomes beyond their control. It also accuses the company of violating several state gambling statutes and the federal Wire Act.
“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” James said in Thursday’s press release. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.”
The lawsuit also alleges that Polymarket allows users ages 18 to 20 to trade sports contracts, despite New York’s minimum age of 21 for mobile sports betting. State officials argue that the company has circumvented licensing requirements and avoided the 51% tax on online sportsbook revenue, which helps fund public education and problem gambling programs.
New York is seeking a permanent ban on Polymarket’s unlicensed gambling operations in the state, along with a full accounting of customer wagers, losses and company revenue.
The state is also demanding restitution, forfeiture of illegal gains and penalties equal to three times the company’s gains from the alleged violations, in addition to $100,000 for each unauthorized offer or attempted offer of sports wagering in New York.
Polymarket counter sues
Polymarket’s countersuit, filed in the U.S. District Court for the Southern District of New York, seeks to block James and state gaming officials from enforcing New York’s gambling laws against its federally regulated exchange.
The company argues that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts traded on designated contract markets, preempting state efforts to regulate them as gambling.
Polymarket will continue operating in New York, according to its Chief Legal Officer Neal Kumar, who criticized the state’s lawsuit in a statement provided to news outlets.
“While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users,” Kumar said. “We didn’t run to preemptively sue the state — we chose to engage with them directly on the substance and address their concerns. They preferred the media hit.”
Polymarket launched its U.S. platform in December 2025, offering sports event contracts through a CFTC-regulated exchange. Its broader prediction market business also offers contracts tied to elections, entertainment and other events.
Courts split over prediction market regulation
Courts across the country have reached conflicting decisions over the regulation of sports prediction markets, creating a patchwork of legal restrictions as states challenge the CFTC’s authority over event contracts.
In April, the Third Circuit sided with Kalshi in its dispute with New Jersey, finding that federal commodities law likely preempts state gambling regulations. The Ninth Circuit reached the opposite conclusion in August, allowing Nevada to enforce its gaming laws against Kalshi’s sports contracts. Both rulings involved preliminary injunctions rather than final judgments.
The widening legal divide comes as New York steps up enforcement against the industry. James also sued Coinbase and Gemini over their prediction market offerings in April and secured an $8 million settlement from a sweepstakes casino operator in September.
The litigation has spread to at least 20 states. New Jersey has already asked the U.S. Supreme Court to resolve the conflicting appellate decisions, putting the question of state authority over sports prediction markets before the justices.
