New York has opened another legal fight over the growing prediction-markets industry, this time targeting Polymarket U.S. State officials sued the company, alleging that its sports-related prediction contracts amount to illegal gambling under New York law.
The lawsuit, filed by New York Attorney General Letitia James and state officials, focuses on Polymarket’s sports event contracts and its efforts to offer those contracts to New York residents. Officials argue that the company is effectively providing sports wagering without the license required under state law.
“By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support,” New York Attorney General Letitia James said in a statement.
Governor Kathy Hochul also criticized the platform, saying, “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.”
New York is seeking penalties that could include three times the amount of Polymarket’s gains, along with $100,000 for each attempt or offer of sports wagering or mobile sports wagering in the state.
Polymarket Pushes Back in Federal Court
Polymarket has strongly challenged New York’s position and filed its own lawsuit against James and the New York State Gaming Commission in federal court. The company argues that its event contracts are federally regulated financial products rather than gambling products controlled by state authorities.
Polymarket also sought to move New York’s lawsuit from state court in Manhattan to the U.S. District Court for the Southern District of New York.
“This action seeks to prevent imminent and irreparable harm arising from New York’s enforcement of state gambling laws against federally regulated derivatives exchanges — enforcement Congress has expressly prohibited,” Polymarket said in its suit.
The company further argued that state officials had incorrectly described federally regulated event-contract trading as gambling. “Defendants have asserted that federally regulated event-contract trading is ‘unregulated gambling,’” the suit said, calling that an “erroneous theory.”
The dispute therefore centers on a key legal question: whether states can apply their gambling laws to prediction-market contracts that fall under federal financial regulation.
A Wider Fight Over Who Regulates Prediction Markets
The case against Polymarket is part of a broader national dispute involving prediction-market companies and government regulators. New York previously brought a similar case against Polymarket competitor Kalshi, while other prediction-market platforms connected to Coinbase and Gemini have also faced state-level legal challenges.
At the federal level, the Commodity Futures Trading Commission has maintained that it has authority over these markets. CFTC Chair Michael Selig has claimed that the agency has “exclusive jurisdiction” over prediction-market contracts.
The dispute could eventually reach the U.S. Supreme Court. Earlier this month, New Jersey officials asked the court to consider their case involving Kalshi, seeking clarity over whether state or federal authorities should oversee prediction markets.
As more companies expand into sports-related event contracts, the outcome of these legal battles could shape how the industry operates across the United States.
