New York officials and prediction market operator Polymarket have entered a new legal battle that could further shape the ongoing debate over who has authority to regulate event-based trading contracts in the United States.
On Thursday, New York Attorney General Letitia James and Governor Kathy Hochul announced legal action against QCX LLC, doing business as Polymarket US, alleging that the company has been operating an unlicensed gambling business in the state. Later the same day, Polymarket responded with its own lawsuit in federal court, arguing that New York is attempting to regulate activity that falls under federal oversight.
The dispute follows a similar lawsuit brought by New York against rival prediction market platform Kalshi in July and forms part of a broader national conflict involving state regulators, prediction market operators, and the Commodity Futures Trading Commission (CFTC).
Polymarket launched its U.S. platform in December 2025 after previously leaving the market in 2022 because of regulatory concerns. The company offers prediction markets that allow users to buy and sell contracts tied to the outcome of future events, including sporting events and other public developments.
New York Challenges Prediction Market Operations
According to the lawsuit filed by New York, Polymarket’s offerings meet the state’s legal definition of gambling because users place money on uncertain outcomes that are outside their control. State officials argue that the company has effectively offered sports wagering without obtaining a license from the New York State Gaming Commission.
The complaint alleges that Polymarket sought to present traditional wagering activity as event contracts on a prediction market platform. New York also argues that the company avoids obligations imposed on licensed sportsbooks and casinos, including taxation requirements that help fund public education, youth sports programs, and problem gambling initiatives.
Attorney General James said, “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.”
Governor Hochul also criticized the company’s operations, stating: “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. 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. Nobody is above the law in our state, and working with Attorney General James, we are fighting to protect New Yorkers and put this illegal operation to an end.”
State officials additionally contend that Polymarket permits participation by users aged 18 to 20. New York law requires participants in mobile sports betting to be at least 21 years old. The state cited concerns about the potential impact of gambling exposure on younger consumers, referencing research linking early gambling activity to mental health and financial difficulties.
The lawsuit seeks multiple remedies, including an injunction that would stop Polymarket from operating in New York without a license. It also requests forfeiture of alleged illegal gains, restitution for affected consumers, and penalties equal to three times the revenue allegedly generated through unlawful activity. New York further seeks a $100,000 penalty for each offer or attempt to offer sports wagering within the state.
Polymarket Responds With Federal Court Filing
Polymarket rejected New York’s position and moved to transfer the state’s case from Manhattan state court to federal court. The company also launched a separate lawsuit against Attorney General James and the New York State Gaming Commission.
In its filing, Polymarket argues that event contracts traded on federally regulated exchanges fall under federal jurisdiction and cannot be regulated by individual states 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 stated in its complaint according to CNBC.
The filing further argues that state authorities have incorrectly characterized prediction market trading, saying: “Defendants have asserted that federally regulated event-contract trading is ‘unregulated gambling,’ ” and describing that position as an “erroneous theory.”
Polymarket US is regulated by the CFTC, the federal agency responsible for overseeing prediction market platforms and derivatives exchanges. The company also operates a separate offshore prediction market business that was founded in 2020.
The jurisdictional dispute mirrors arguments previously advanced by both Polymarket and Kalshi, which have maintained that states lack authority over federally regulated prediction markets.
Growing Regulatory Tensions Across the Industry
The legal confrontation arrives amid increasing scrutiny of prediction market platforms nationwide. Several states have attempted to apply gambling laws to these businesses, while the CFTC has asserted that federal law grants it regulatory authority over such markets.
Earlier this year, the CFTC initiated legal action against New York and Massachusetts in response to efforts by those states to enforce gambling laws against federally regulated prediction market operators.
New York has also expanded its enforcement activity in related areas. In addition to the lawsuits against Kalshi, Gemini Titan, and Coinbase, Attorney General James has pursued actions against sweepstakes casinos and other businesses accused of operating outside state gambling regulations.
Polymarket has continued expanding its profile despite the legal disputes. The company recently launched a major advertising campaign and secured sponsorship arrangements, including a marketing partnership with the New York Yankees. The platform has also attracted attention through endorsements from Philadelphia 76ers star LeBron James.
Responding to New York’s latest lawsuit, Polymarket Chief Legal Officer Neal Kumar defended the company and signaled that it intends to continue fighting the allegations.
“Polymarket was founded in a tiny NYC apartment and now has more than 350 employees here, embodying why people and businesses come here to make it. We believe in New York and we’re staying here. While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users,” Kumar said.
The outcome of the competing lawsuits could have implications beyond New York, as courts continue to weigh the boundaries between state gambling regulation and federal oversight of prediction markets.