NEW YORK, United States – New York has sued Polymarket, accusing the prediction-market operator of running an unlicensed gambling business in the state and asking a court to stop it from operating without a state gambling license.
The lawsuit, filed Thursday by New York Attorney General Letitia James against QCX LLC, which does business as Polymarket US, argues that the company’s prediction contracts meet the state’s legal definition of gambling because users wager money on uncertain outcomes beyond their control.
Polymarket responded with a separate federal lawsuit hours later, arguing that prediction markets fall under the exclusive regulatory authority of the U.S. Commodity Futures Trading Commission rather than state gambling regulators. The two lawsuits place the company and New York on opposite sides of a broader dispute over whether prediction markets should be treated primarily as financial markets or gambling operations.
New York challenges Polymarket’s legal status
New York’s case centers on the way Polymarket structures and markets its contracts.
The state’s Attorney General’s Office says Polymarket launched its U.S. service in December 2025, initially allowing users to wager on sporting events before expanding into markets covering other events. Investigators concluded that the platform was operating an unlicensed gambling operation in New York.
New York argues that the contracts constitute gambling because the outcomes are uncertain and outside the control of the people placing the wagers, or depend on chance.
The state says Polymarket has not obtained a license from the New York State Gaming Commission and therefore does not operate under the licensing, tax and consumer-protection requirements imposed on regulated gambling businesses.
The lawsuit also challenges Polymarket’s age requirements.
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According to the state, users between 18 and 20 can access its prediction markets even though New York requires people to be at least 21 to participate in mobile sports betting.
Whether those activities legally constitute gambling under New York law is now a matter for the courts.
Polymarket says federal law controls
Polymarket disputes New York’s authority to regulate its prediction markets as gambling.
The company filed its own lawsuit in Manhattan federal court seeking a declaration that New York cannot enforce its civil and criminal gambling laws against the platform. It argues that the CFTC has exclusive authority over prediction markets and that state intervention conflicts with federal regulation.
Polymarket’s Chief Legal Officer Neal Kumar said the company had attempted to address New York’s concerns before the state filed its lawsuit.
The company’s position is that complying with New York’s demands would put it in conflict with what Polymarket describes as its federally protected ability to operate its markets.
The dispute therefore involves more than whether particular contracts resemble sports wagers. It also raises a jurisdictional question: whether states can apply their gambling laws to prediction markets operating under a federal derivatives framework.
Polymarket already has federal regulatory status
The dispute is complicated by the status of Polymarket’s U.S. operating entity.
The CFTC’s list of designated contract markets identifies QCX LLC, doing business as Polymarket US, as a designated contract market. The agency’s records show the designation date as July 9, 2025.
That federal status does not resolve New York’s lawsuit.
The state argues that its gambling laws still apply to activity occurring within New York, while Polymarket argues that federal regulation preempts the state’s attempt to regulate its prediction markets.
The competing positions will now have to be addressed through litigation.
State and federal approaches are colliding
The Polymarket case is part of a larger legal fight over prediction markets in the United States.
New York has already brought a similar case against Kalshi, another major prediction-market operator. The state has also pursued cases involving prediction-market products offered by Coinbase Financial Markets and Gemini Titan.
The disputes have produced competing claims about the proper regulatory framework.
State authorities argue that contracts allowing people to wager on sports and other uncertain events can fall within state gambling laws.
Prediction-market companies argue that their contracts are derivatives and therefore belong under federal commodities regulation.
Reuters reported that federal appeals courts are divided over aspects of the broader regulatory dispute, raising the possibility that the issue could eventually reach the U.S. Supreme Court.
What New York is asking the court to do
New York is seeking an order preventing Polymarket from operating as an unlicensed gambling business in the state.
The Attorney General’s Office is also asking the court to require the company to forfeit what the state characterizes as illegal gains, provide restitution to affected consumers and pay fines equal to three times those gains.
The state has also argued that regulated gambling generates tax revenue used for public purposes and that unlicensed operators avoid those obligations.
Those are allegations in the state’s lawsuit and have not been established by a final court ruling.
Polymarket is seeking the opposite outcome in its federal case: a ruling that New York cannot apply its gambling laws to the company’s prediction-market operations.
A growing fight over prediction markets
Prediction markets have expanded rapidly in the United States, offering contracts tied to sports, elections, economic indicators, cultural events and other outcomes.
Their growth has blurred a regulatory boundary that traditionally separated financial derivatives from gambling.
For states, the concern is that a contract tied to the outcome of a sporting event can function much like a conventional wager even if it is structured as a financial contract.
For prediction-market operators, the distinction is central to their business model. Their argument is that event contracts belong within the federal derivatives system and should not be subjected to a patchwork of state gambling rules.
The New York litigation will test those competing interpretations in one of the country’s largest markets.
For now, New York has alleged that Polymarket is operating illegally, while Polymarket maintains that federal law prevents the state from regulating its prediction markets in the manner New York seeks.
Neither position has been finally resolved by the courts.
Reporting Credit: New York Attorney General’s Office — lawsuit against QCX LLC d/b/a Polymarket US, allegations concerning unlicensed gambling, requested remedies and investigation findings; U.S. Commodity Futures Trading Commission — designation of QCX LLC d/b/a Polymarket US as a designated contract market; Polymarket — federal lawsuit and response challenging New York’s regulatory authority.
