A legal battle between New York and prediction-market platform Polymarket has intensified, with both sides filing lawsuits over whether contracts traded on the platform fall under state gambling laws or should instead be governed exclusively by federal regulators.
New York Attorney General Letitia James filed a case in Manhattan state court targeting Polymarket, accusing the company of operating an unlicensed gambling business. The action follows similar legal challenges involving other prediction-market and financial platforms, including Kalshi, Coinbase Financial Markets and Gemini Titan.
New York alleges that Polymarket operated without a license from the state’s Gaming Commission and allowed users below the state’s legal gambling age to participate. Officials also argue that the platform’s business model can expose users to gambling-related risks without the safeguards required under state law.
New York Governor Kathy Hochul said the operation had put residents, particularly younger users, at risk.
Polymarket responded with a lawsuit of its own in federal court in Manhattan, arguing that the Commodity Futures Trading Commission has exclusive authority over prediction markets. The company said New York’s attempt to apply state gambling rules creates a conflict with federal regulation and could expose it to significant penalties.
Polymarket Chief Legal Officer Neal Kumar said the company had attempted to resolve the dispute with state officials before the lawsuits were filed.
New York is seeking civil penalties, the recovery of alleged illegal gains and restitution for customers. Polymarket, meanwhile, wants the federal court to declare that New York cannot apply its civil or criminal gambling laws to the company’s operations.
A Wider Fight Over Prediction Markets
The dispute comes as prediction markets have expanded rapidly across the United States. Their popularity increased after platforms demonstrated strong performance in forecasting the outcome of the 2024 presidential election.
The legal landscape remains unsettled. Federal appeals courts have reached differing conclusions over the balance between federal oversight and state authority, leaving open the possibility that the issue could eventually reach the US Supreme Court.
Founded in 2020, Polymarket describes itself as the world’s largest prediction market. The company stayed out of the US market for more than three years before returning late last year after receiving approval from the CFTC.
The platform has also attracted investment from 1789 Capital, a venture firm backed by Donald Trump Jr., who is a partner at the firm and an adviser to Polymarket.
New York has cited reports valuing Polymarket at more than $20 billion.
State Officials Point to Sports Contracts
A central issue in New York’s case is the nature of the contracts traded on Polymarket.
James argues that the platform’s contracts are essentially wagers because participants put money on outcomes they cannot control. The state’s complaint points to sports-related contracts as examples, including a July matchup between the Los Angeles Dodgers and New York Mets in which users could trade on whether the Dodgers would win by more than 1.5 runs. The Dodgers prevailed 4-2.
New York has also challenged Polymarket’s acceptance of users aged 18 to 20. State law sets the minimum age at 21 for mobile sports betting.
The competing lawsuits now place the question of jurisdiction at the center of a rapidly growing industry: whether prediction markets should operate primarily as federally regulated financial markets, or whether states can treat some of their contracts as gambling subject to local licensing and consumer-protection rules.
