New York has sued Polymarket’s U.S. operation, alleging that the prediction-market platform is effectively running an unlicensed gambling business by allowing users to wager on sporting events and other outcomes without complying with state gaming laws. Attorney General Letitia James is seeking to stop Polymarket from operating without a New York gambling license and wants fines, forfeiture of gains and restitution for users. Polymarket responded with its own federal lawsuit, arguing that its event contracts fall under the federal Commodity Exchange Act and the exclusive jurisdiction of the Commodity Futures Trading Commission. The competing lawsuits sharpen a growing national dispute over whether states can apply traditional gambling regulations to federally regulated prediction markets—a question complicated by conflicting federal appellate decisions involving Polymarket rival Kalshi.
Key Takeaways
- New York alleges Polymarket US is offering what amounts to sports gambling without a state gaming license, including access beginning at age 18 despite New York’s 21-year minimum for mobile sports betting.
- Polymarket disputes New York’s authority, arguing that its event contracts are federally regulated derivatives and that the Commodity Futures Trading Commission has exclusive jurisdiction under federal law.
- The case could have consequences far beyond Polymarket because federal appellate courts have taken conflicting approaches to whether states may regulate sports-event contracts offered through federally regulated prediction markets.
In-Depth
New York’s lawsuit against Polymarket is the latest front in a larger jurisdictional fight over whether contracts are federally regulated financial products or state-regulated gambling. Attorney General Letitia James alleges that QCX LLC, operating as Polymarket US, has offered unlicensed wagering in New York, while allowing participation beginning at age 18 even though New York requires mobile sports bettors to be 21.
The state wants Polymarket barred from operating as an unlicensed gambling business and seeks fines, forfeiture of unlawful gains, and restitution. State officials also argue that prediction-market operators avoid gaming taxes and consumer-protection requirements imposed on licensed sportsbooks.
Polymarket answered with its own lawsuit. The company contends that its event contracts fall within the Commodity Exchange Act and that the Commodity Futures Trading Commission has exclusive federal jurisdiction, preempting New York’s gambling restrictions. That argument turns the dispute into more than a conventional enforcement case: it tests how far states may go when federally regulated exchanges offer products that closely resemble traditional wagers.
Courts have not spoken with one voice. Recent federal appellate decisions involving rival Kalshi have produced conflicting approaches to state authority over sports event contracts, increasing the likelihood that the Supreme Court may eventually have to resolve the divide.
The broader issue is regulatory accountability. States maintain licensing, age, taxation, and responsible-gambling regimes. Prediction markets argue Congress created a federal derivatives framework that states cannot override. The courts must now determine which regulatory structure controls when financial-market terminology and gambling-like products occupy the same ground.
Sources
- https://ag.ny.gov/press-release/2026/attorney-general-james-and-governor-hochul-announce-lawsuit-against-polymarket
- https://www.reuters.com/world/new-york-sues-polymarket-says-it-ran-illegal-gambling-operation-2026-09-24/
- https://apnews.com/article/polymarket-new-york-lawsuit-gambling-b75b753e3c3cd069cdf8d6af175c9fbb
- https://dockets.justia.com/docket/new-york/nysdce/1%3A2026cv08345/673553