New York Sues Polymarket, Calling Prediction Market an Illegal Gambling Operation
Bitcoin Magazine New York Sues Polymarket, Calling Prediction Market an Illegal Gambling Operation Attorney General Letitia James and Governor Kathy Hochul allege Polymarket operates without a licens...
Attorney General Letitia James and Governor Kathy Hochul allege Polymarket operates without a license in a new complaint.
New York Attorney General Letitia James and Governor Kathy Hochul on Thursday filed a lawsuit against crypto-based prediction market Polymarket, accusing the platform of running an unlicensed gambling operation in the state.
An investigation by the Attorney General’s office concluded that these markets meet New York’s legal definition of gambling because users stake money on uncertain outcomes they cannot control.
Polymarket never obtained a license from the New York State Gaming Commission, the suit alleges, and so avoided the taxes that licensed casinos and mobile sportsbooks pay. That revenue helps fund public schools, youth sports programs and problem gambling treatment.
The suit comes as regulators like the Securities and Exchange Commission and the Commodity Futures Trading Commission are working to regulate crypto-powered prediction markets.
Polymarket and rival Kalshi argue they aren’t gambling sites at all, but rather federally regulated exchanges offering “event contracts,” a type of derivative, which would put them under the Commodity Futures Trading Commission rather than state gaming laws.
The CFTC agrees, and it has joined the fight on the platforms’ side. In 2026 it sued nine states, arguing that it should have exclusive nationwide authority over the industry.
Thursday’s complaint also says the platform is open to users aged 18 to 20, although New York requires mobile sports bettors to be at least 21.
“By skirting New York’s laws, Polymarket is targeting the most vulnerable,” James said. Hochul added that the company had “knowingly” violated state law and put underage users at risk.
The state is asking a court to bar Polymarket from operating as an unlicensed gambling business in New York. It also wants the company to forfeit its illegal gains, repay harmed users and pay fines equal to three times those gains.
The lawsuit is the latest in a string of New York actions against gambling-adjacent platforms. James and Hochul sued rival 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.
Polymarket launched in the United States in December 2025, initially letting users bet on sporting events with plans to expand into markets on a wide range of topics.
Asanat Analysis — Why it matters
New York's lawsuit against Polymarket represents a critical enforcement moment for prediction markets in the US. The state is applying its existing gambling statute framework rather than treating prediction markets as a distinct asset class—a legal posture that could ripple across other jurisdictions. This follows years of regulatory ambiguity where Polymarket operated in a gray zone, relying on offshore structuring and a claim that its markets constitute speech or information aggregation rather than wagering.
The timing matters: Polymarket has grown to billions in notional volume and mainstream visibility (election betting in 2024), making it a larger regulatory target than smaller platforms. A New York conviction or forced shutdown would test whether US states can kill domestic prediction market access through existing gaming laws, or whether federal pre-emption or legislative carve-outs emerge. The broader implication: crypto platforms operating in legal gray zones face accelerating enforcement costs, even if their legal status remains philosophically contested across regulatory bodies.
Prediction markets occupy an unusual position—they're treated as derivatives in some jurisdictions, gambling in others, and legitimate information markets in Europe. A New York loss for Polymarket doesn't resolve this, but it does raise compliance costs and could fragment the market into offshore and domestic tiers, echoing patterns seen in crypto exchanges post-2017.