NY Attorney General Sues Polymarket, Calling Its Prediction Markets Illegal Unlicensed Gambling

New York Attorney General Letitia James has sued Polymarket, accusing the prediction-market platform of operating an illegal and unlicensed gambling business in the state. The lawsuit marks another escalation in New York's growing fight against prediction markets, as officials argue that contracts allowing users to wager on real-world events amount to gambling under state law.

The lawsuit was announced on 24 September by James and Governor Kathy Hochul against QCX LLC, which operates as Polymarket US. New York's Attorney General's Office said its investigation concluded that Polymarket's prediction markets meet the state's legal definition of gambling because users are wagering on uncertain events outside their control or on outcomes involving chance.

The state argues that Polymarket has not obtained a licence from the New York State Gaming Commission, despite allowing users to trade contracts connected to sporting events and other real-world outcomes.

Officials are seeking a court order preventing Polymarket from operating as an unlicensed gambling business in New York, along with fines, forfeiture of alleged illegal gains and restitution for affected customers.

Officials Raise Concerns About Underage Users

A major part of New York's complaint concerns the age of users. According to the Attorney General's Office, Polymarket's prediction markets were available to people aged between 18 and 20, while New York requires users to be at least 21 to participate in mobile sports betting.

State officials argue that this creates additional concerns around problem gambling and consumer protection. The lawsuit also claims that operating outside the state's gambling framework allows Polymarket to avoid requirements that apply to licensed gambling businesses, including taxation and regulatory safeguards.

James has argued that New York's gambling laws are intended to limit the potential harms associated with gambling while generating money for public programmes.

Polymarket Rejects New York's Position

Polymarket has disputed the state's approach and has filed its own lawsuit against New York officials. The company argues that prediction markets fall under federal oversight rather than state gambling regulation, specifically pointing to the Commodity Futures Trading Commission's authority over event contracts.

Polymarket Chief Legal Officer Neal Kumar criticised New York's decision to sue, saying the company had attempted to engage with officials over their concerns. The company maintains that it intends to defend its platform and its users.

That creates a central legal question in the dispute: whether prediction markets should be regulated primarily as financial markets under federal law or treated as gambling operations under state law.

Other Prediction Market Platforms Facing Pressure

The lawsuit comes amid a broader dispute between prediction-market companies and state regulators across the US.

New York previously sued Kalshi, another major prediction-market operator, accusing it of running an illegal gambling operation. James' office also sued Coinbase and Gemini over their prediction-market platforms earlier this year.

The growing number of cases has created a nationwide regulatory battle over how event contracts should be classified.

The Case Could Shape the Future of Prediction Markets

Polymarket's case could have implications well beyond New York. Prediction markets have expanded rapidly, allowing users to take positions on sporting events, elections, entertainment and other developments.

New York's lawsuit seeks to bring those activities under state gambling rules, while Polymarket's countersuit argues that federal law gives the CFTC authority over the market.

The courts will ultimately have to determine how those competing regulatory frameworks apply to prediction markets. Until then, the dispute leaves companies such as Polymarket operating in an increasingly complicated legal environment as states and federal regulators continue to clash over who has the authority to oversee the rapidly growing industry.