New York sues Polymarket, calling it an unlicensed gambling operation

New York sues Polymarket over unlicensed gambling claims

New York Attorney General Letitia James and Governor Kathy Hochul filed a lawsuit against the crypto-based prediction market Polymarket, accusing it of running an unlicensed gambling operation in the state. The filing was announced in an Attorney General's office press release and in a court petition.

A prediction market is a platform where users put money behind the outcome of future events. An investigation by the Attorney General's office concluded that Polymarket's markets meet New York's legal definition of gambling, because users stake money on uncertain outcomes they cannot control.

The lawsuit alleges Polymarket never obtained a license from the New York State Gaming Commission.

What the complaint says about taxes and age limits

• The suit alleges Polymarket avoided the taxes that licensed casinos and mobile sportsbooks pay. According to the complaint, that revenue supports public schools, youth sports programs and problem gambling treatment.
• The complaint says the platform is open to users aged 18 to 20, while New York requires mobile sports bettors to be at least 21.
• Polymarket launched in the United States in December 2025. It initially let users bet on sporting events, with plans to expand into markets on a wide range of topics.

What James and Hochul said

James said: "By skirting New York's laws, Polymarket is targeting the most vulnerable."

Hochul said the company had "knowingly" violated state law and put underage users at risk.

What the state wants the court to do

New York is asking a court to bar Polymarket from operating as an unlicensed gambling business in the state. It also wants the company to give up its illegal gains, repay users it harmed, and pay fines equal to three times those gains.

Polymarket and Kalshi say they are federally regulated exchanges

Polymarket and its rival Kalshi argue they are not gambling sites. They say they are federally regulated exchanges that offer "event contracts," a type of derivative. A derivative is a financial contract whose value comes from another asset or event.

Under that view, the platforms would fall under the Commodity Futures Trading Commission (CFTC), the federal agency that oversees derivatives, rather than state gambling laws. The CFTC agrees, and it has joined the fight on the platforms' side. In 2026 the agency sued nine states, arguing it should have exclusive nationwide authority over the industry.

The lawsuit comes as regulators including the Securities and Exchange Commission and the CFTC are working to regulate crypto-powered prediction markets.

Earlier New York cases against similar platforms

This is the latest in a series of New York actions against gambling-related platforms. James and Hochul sued the prediction market Kalshi in July, and James sued Coinbase and Gemini in April over similar claims. Earlier this month, James secured $8 million from the leading operator of sweepstakes casinos.

What is confirmed

It is confirmed that James and Hochul filed a lawsuit against Polymarket on Thursday, and that the Attorney General's office announced it. It is also confirmed that the CFTC sued nine states in 2026 over authority in this area, and that Polymarket launched in the United States in December 2025.

The claims that Polymarket ran an unlicensed gambling business, avoided taxes and allowed underage users are allegations made in the state's complaint. They have not been proven in court. The statements from James and Hochul are their own positions.

What is still unclear

The outcome of the case is not known. It is also unclear how a court will resolve the dispute over whether state gambling laws or federal CFTC rules apply to these platforms.

The supplied material does not include a response from Polymarket to this specific lawsuit.

Why this matters for prediction markets

The case centers on a question that affects the whole sector: whether prediction markets are gambling businesses governed by state rules, or federally regulated exchanges. That decision would shape who oversees them and whether they owe state taxes that fund public programs. New York has already taken similar action against other platforms, and the CFTC has pushed back on state authority.

Sources

• Bitcoin Magazine

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