New York Attorney General Letitia James and Governor Kathy Hochul have sued Polymarket US, alleging the prediction-market platform is running unlicensed, illegal gambling in the state. The suit seeks a court injunction to halt the alleged activity, along with fines, forfeiture of alleged illegal proceeds and restitution for users. The allegations have not been proven and now face a court test.
According to the New York Attorney General’s office, an investigation found that Polymarket offered users the ability to wager on sporting events without holding a New York gambling licence. The state also alleges the platform exposed users below New York’s legal gambling age of 21 to those same markets, a claim that goes to the heart of the state’s consumer-protection framework for wagering products.
The lawsuit asks a court to block Polymarket from continuing what New York characterises as an unlicensed gambling business. Beyond the injunction, the state is pursuing financial penalties, forfeiture of alleged illegal gains and restitution for affected users. No final penalty, settlement or licence condition has been determined; the case remains at the filing stage.
Federal Framework Meets State Gambling Law
Polymarket returned to the U.S. market after acquiring regulated exchange infrastructure and positioning itself within the federal commodities framework overseen by the CFTC. New York’s position is that this federal structure does not exempt the platform from state gambling statutes, echoing arguments raised in Polymarket’s prior exposure to state gambling enforcement and the limits already tested around its federal preemption claims.
The tension is sharpest around sports contracts. A market tied to inflation or an election can be framed as a forecasting or hedging tool, but a contract paying out on a basketball game’s result looks far closer to conventional sports betting – the exact distinction New York is asking a court to draw.
Part of a Wider State Pushback
The case lands amid a broader pattern of state challenges to prediction-market operators, including Kentucky’s lawsuit alleging illegal gambling against Polymarket and Kalshi, and Baltimore’s separate action targeting the same contracts as unlawful sports wagering. CNBC reported that Polymarket sought to move the case to federal court, while Reuters reported that the company filed its own suit against James and the state’s Gaming Commission, arguing the CFTC holds exclusive authority over event contracts – details not confirmed in New York’s own filing materials.
Prediction markets have grown from a crypto niche into a mainstream consumer product, and that growth has outpaced regulatory consensus. Federal regulators may treat event contracts as commodities; state regulators, looking at the same product, may see a wager. The New York case does not settle that question, but it raises the stakes for how sports-linked prediction contracts get treated across major U.S. jurisdictions, with implications for how operators structure and defend those products going forward.
Petra Vanhoof has spent the better part of a decade following the shifting tides of gambling regulation across Europe and beyond. She came up through the compliance side of the industry before pivoting to writing, which gives her a grounded, no-nonsense perspective on the rules, loopholes, and political maneuvering that shape how operators actually do business. She is particularly drawn to the gap between what regulators say and what the market ends up doing in response.