NY Sues Polymarket Over Gambling; Platform Countersues

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Fri Sep 25, 2026, 1:00 pm ET

Read Time: 4 minutes

NY Sues Polymarket Over Gambling; Platform Countersues

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New York and Polymarket have launched competing lawsuits over the legality of prediction markets in the state.

The legal battle began Thursday when New York Attorney General Letitia James sued Polymarket. The state alleges that the company operates an unlicensed gambling platform.

Hours later, Polymarket filed a federal countersuit against James and other New York officials. The company also moved to remove the state's lawsuit from Manhattan state court to federal court in the Southern District of New York.

The dueling lawsuits now pit state gambling regulation against federal oversight of prediction-market contracts. That conflict could have wider implications for prediction markets and US online sportsbooks.

New York Targets Polymarket Operations

New York claims Polymarket's contracts meet the state's definition of gambling. The state argues that users wager money on uncertain outcomes beyond their control.

The lawsuit also alleges that Polymarket operates without a New York gambling license. New York therefore wants the court to stop the company's operations as an unlicensed gambling business.

The state is seeking several financial remedies. These include three times the amount of Polymarket's alleged earnings from New York operations. The state also seeks penalties of up to $100,000 for each violation or offer.

New York is additionally seeking forfeiture of alleged illegal gains and restitution for affected consumers.

Attorney General James said the state's gambling laws serve broader consumer and public interests.

"Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs. By skirting New York's laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support. My office will never hesitate to take action to defend our laws and keep New Yorkers safe."

New York also objects to Polymarket allowing users between 18 and 20 to participate. The state says mobile sports betting requires customers to be at least 21.

Hochul Raises Consumer Protection Concerns

Governor Kathy Hochul also criticized Polymarket's operations. She argued that unlicensed prediction markets could affect consumers and state tax revenues.

"I will always stand up for New Yorkers when bad corporate actors prey on consumers and threaten tax dollars that fund schools and critical public services," Hochul said.

She added that Polymarket's alleged operations could expose younger users to problem gambling risks.

"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.

Hochul also said New York would continue working with James to enforce state gambling laws against the platform.

Polymarket Challenges New York's Authority

Polymarket disputes New York's characterization of its prediction markets.

In its federal filing, the company argues that event contracts traded on federally regulated exchanges fall under federal jurisdiction. It therefore argues that individual states cannot regulate those contracts through gambling laws.

"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 filing.

The company also challenged the state's description of prediction-market trading as gambling.

"Defendants have asserted that federally regulated event-contract trading is 'unregulated gambling,'" the filing states. Polymarket called that position an "erroneous theory."

The company is also seeking to transfer New York's state case into federal court. The move would place the litigation before the U.S. District Court for the Southern District of New York.

That procedural action adds another layer to the dispute. The courts must address both the substance of New York's gambling allegations and the proper forum for the case.

Polymarket Maintains New York Connections

The dispute also carries a notable local dimension for Polymarket.

The company was founded in New York City and continues to maintain a significant local workforce. Its legal leadership has highlighted that more than 350 employees work in the New York area.

That footprint gives the company a direct connection to the state where the lawsuit was filed. Polymarket has also indicated that it intends to continue operating in New York.

The company's local presence therefore contrasts with the state's effort to restrict its operations under New York gambling law.

A Broader Test for Prediction Markets

The New York case follows growing regulatory disputes surrounding prediction markets across the United States.

Several states have increasingly challenged contracts tied to sports and other events. Meanwhile, prediction-market operators have argued that federal commodities regulation governs their products.

That distinction matters for the expanding prediction-market sector. It also creates potential regulatory overlap with traditional US online sportsbooks.

New York has already pursued similar action against Kalshi. The Polymarket case could therefore become another major test of how courts distinguish financial event contracts from gambling.

For now, both sides are asking courts to recognize different sources of regulatory authority. The proceedings will determine how New York gambling laws apply to Polymarket and whether federal oversight limits that authority.

The competing lawsuits leave the broader legal framework unresolved. Further court decisions could clarify rules governing prediction markets, sports event contracts, consumer protections, and state licensing requirements.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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