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New York sues Polymarket, alleging it is running an illegal gambling operation
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New York Attorney General Letitia James and Gov. Kathy Hochul on Thursday sued Polymarket’s U.S. business, alleging that it is operating an illegal gambling operation in the state. The suit names QCX LLC, which does business as Polymarket US, and asks a court to bar the company from offering gambling-related markets to New Yorkers without the required license. It seeks restitution, forfeiture of allegedly illegal gains and financial penalties equal to three times those gains.
Polymarket’s return to the U.S. market has been relatively recent: it launched its domestic platform in December 2025, initially focusing on contracts tied to sporting events. Users trade money on whether an event will occur, and the company said at launch that it intended to expand into additional market categories. New York interprets those contracts as bets rather than ordinary financial instruments.
The state’s complaint centers on the absence of a gambling license and says the platform’s sports-related markets violate New York law. It also challenges Polymarket’s age controls, arguing that users between 18 and 20 can participate even though the state requires participants in mobile sports betting to be at least 21. These allegations concern the legality of the business model, not merely the outcome of any individual prediction.
The lawsuit brings a renewed test to the federal-state divide over prediction markets. Polymarket and similar firms argue that event contracts are financial products overseen at the federal level by the Commodity Futures Trading Commission. State officials counter that sports-related contracts function as gambling and must comply with state licensing, age and consumer-protection rules. The dispute raises the question of whether federal commodity-market regulation can coexist with state gambling authority over the same products.
New York has been particularly active in that fight. In July, the state sued Kalshi after negotiations with Hochul’s office broke down, seeking as much as $36 billion in penalties and disgorgement. A number of related disputes have reached appellate courts, while a separate Kalshi case involving New Jersey has been appealed to the U.S. Supreme Court.
In a statement, James said New York’s gambling laws protect residents, address the potential harms of problem gambling and fund education and other public-benefit programs. A Polymarket spokesperson did not immediately respond to a request for comment. The filing nevertheless marks a direct escalation in regulators’ efforts to determine who can define and oversee prediction-market products.
If New York succeeds, Polymarket could be barred from serving the state unless it obtains a gambling license, while the financial remedies could substantially increase the cost of its U.S. expansion. A ruling could also influence other states considering comparable enforcement actions. Conversely, a defense victory would not necessarily settle every state’s authority, since gambling rules and market designs can differ across jurisdictions.
The immediate attention will focus on the court’s treatment of the requested restrictions and financial remedies, alongside any response from Polymarket. Long term, the case could prompt platforms to tighten age verification, change how sports markets are structured or limit where they accept customers. It may also shape a broader congressional or regulatory debate over federal oversight, although the lawsuit itself cannot determine the nationwide legality of prediction markets.
