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State of Play’s TL;DR
- New York and Polymarket filed competing lawsuits Thursday.
- The suits seek answers to whether prediction markets are illegal gambling and who has authority to regulate them.
New York Attorney General Letitia James and Polymarket sued each other on Sept. 24, opening a two-front court fight over whether US prediction markets are illegal gambling or products regulated exclusively at the federal level.
The dispute matters beyond one operator. It puts state gambling enforcement on a collision course with the Commodity Futures Trading Commission (CFTC), and the outcome could shape how event-contract platforms are regulated across the US.
New York filed first in state court in Manhattan, alleging Polymarket operated without required New York State Gaming Commission licenses. The state said the platform exposed users to gambling-related harms, including by allowing 18- to 20-year-olds to participate even though 21 is the minimum age for mobile sports betting in New York.
James called prediction markets “quintessentially gambling,” arguing users wager on outcomes they do not control and expect a payout if they win. New York Gov. Kathy Hochul said Polymarket was “running an unlicensed gambling operation” and putting New Yorkers at risk, especially underage users.
New York is seeking civil fines, forfeiture of alleged illegal gains, and full restitution to customers.
Polymarket says federal law pre-empts New York enforcement
Polymarket responded several hours later with its own lawsuit in Manhattan federal court. The company said the CFTC has exclusive authority to regulate prediction markets and that New York is trying to impose state gambling law on a federally overseen market.
In its filing, Polymarket called New York’s position “an extraordinary assertion of state power squarely foreclosed by federal law.” The company said the state was forcing it into an “impossible choice” between complying with state regulators and continuing operations while facing potentially significant criminal liability.
Polymarket relaunched in the US in December 2025 after receiving a CFTC green light three months earlier. Founded in 2020, the company reportedly now has a business exceeding $20 billion.
Why the case could reach beyond New York
New York’s complaint cited a market on a Los Angeles Dodgers vs. New York Mets game as an example of what it considers gambling-like activity on the platform. The broader legal issue, however, is who gets to regulate prediction markets as they expand into politics, sports, and other real-world events.
That question is already producing conflicting answers in federal appeals courts, according to The Business Times. With courts divided over whether these markets should be treated as gambling or as financial products, the fight between New York and Polymarket could become a test case with implications for other operators, including Kalshi, Coinbase Financial Markets, and Gemini Titan. New York sued two of those companies in April.
Based on reporting by The Business Times.
