New York Attorney General Letitia James sued prediction market company Polymarket, alleging the company is operating an illegal gambling operation in the state and offering unlicensed betting markets to New Yorkers.
The lawsuit marks the latest legal challenge facing prediction market companies as states and federal regulators clash over whether event contracts constitute gambling subject to state laws or financial products regulated by the federal government.
Polymarket is the second major prediction market company James has targeted for its operations in New York. Her office previously sued rival company Kalshi over similar allegations that its event contracts amount to illegal gambling. But the two cases are separate lawsuits.
Prediction markets allow users to buy and sell contracts tied to the outcome of real-world events, including sporting contests, elections, and other events. The companies have argued that the contracts are financial products rather than traditional wagers.
“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. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.”
Gov. Kathy Hochul (D-NY) also backed the lawsuit, accusing Polymarket of operating an unlicensed gambling business.
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming,” Hochul said.
Polymarket disputed the allegations and accused the attorney general’s office of recycling arguments from its earlier litigation against Kalshi.
“While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users,” Neal Kumar, Polymarket’s chief legal officer, told the Washington Examiner. “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.”
The lawsuit alleged Polymarket has advertised itself as a sports betting platform for over a year.
“On August 17, 2025, Polymarket posted on its X.com account an advertisement for the launch of its U.S.-based mobile application, stating ‘BAD NEWS (For sportsbooks): Polymarket is coming home to the US. Be the first to know when. TRADE EVERY FOOTBALL GAME IN ALL 50 STATES” (emojis omitted),’” the court filing said.
The Polymarket case comes while prediction market companies, state governments, and federal regulators are engaged in battles across the country over who has jurisdiction over the rapidly expanding industry.
The litigation centers on the Commodity Exchange Act, which gives the federal government authority over certain derivatives and event contracts. The Commodity Futures Trading Commission has asserted that federally regulated prediction markets fall under its jurisdiction, while several states have argued that their gambling laws still apply.
The federal-state dispute has already spilled into separate litigation. In April, the CFTC sued New York after state officials sought to enforce its gambling laws against federally regulated exchanges through cease-and-desist letters and lawsuits.
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The federal agency is seeking a declaration that federal law preempts New York’s gambling laws in this area, as well as an injunction preventing the state from taking enforcement action against CFTC-registered exchanges.
“CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets,” CFTC Chairman Michael Selig said. “The CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”