New York sued Polymarket today, alleging that it runs an “illegal gambling operation” through its prediction market.
“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,” Governor Kathy Hochul said in a <a href="https://www.governor.ny.gov/news/governor-hochul-and-attorney-general-james-announce-lawsuit-against-polymarket-running-illegal” rel=”nofollow noopener” target=”_blank”>press release announcing the lawsuit.
Polymarket is “sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do,” New York said. “This tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment.”
Polymarket is “available to users between the ages of 18–20, even though New York law requires a person to be at least 21 years old to participate in mobile sports betting,” exposing young people to gambling’s “damaging effects on their mental and financial well-being,” New York said.
New York previously sued Kalshi, Polymarket’s chief rival. The Trump administration is on the side of the prediction markets, with the Commodity Futures Trading Commission (CFTC) asserting exclusive jurisdiction over the platforms. In August, the CFTC declared a “market emergency” in New York in an attempt to stop the state from applying its gambling laws to Kalshi.
Gambling with a different name
Polymarket and its rival Kalshi offer sports bets in the form of “event contracts” or “swaps,” which state governments and some courts say are just gambling with a different name.
“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” New York Attorney General Letitia James said. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.”
The New York press release said the state government is “seeking a court order stopping Polymarket from operating as an unlicensed gambling business and requiring the company to pay fines, forfeit all illegal gains and pay restitution to users.” The lawsuit was filed today in a New York County court.
Polymarket’s main platform technically hasn’t been available in the US since 2022, when the CFTC ruled it was an illegally unregistered exchange. Polymarket’s website is restricted to view-only mode in the US, though users can get around that with a virtual private network. Polymarket promoted its platform in the US with a campaign that paid dozens of social media users to film themselves making fake bets on copies of the Polymarket website, The Wall Street Journal reported in June.
Polymarket is seeking the CFTC’s permission to bring its main exchange back to the US, but it was able to launch a more limited, mobile-app version in December 2025 after acquiring QCX, a CFTC-licensed firm. The New York lawsuit was filed against QCX LLC, also known as Polymarket US.
NY alleges “flagrant disregard” of state law
While Kentucky sued Polymarket in June, most of the court cases over state regulation of prediction markets have involved Kalshi. States including New York have sued Kalshi, and Kalshi sued other states after receiving cease-and-desist orders commanding it to stop offering gambling.
Polymarket “seeks to avoid the legal and financial consequences of New York’s close regulation of gambling by offering what is quintessentially wagering under the guise of ‘event contracts’ on a ‘prediction market,’” the New York lawsuit said. “Respondent accepts wagers from members of the public as a gambling business in New York in flagrant disregard of New York’s State Constitution, penal laws, and other statutes. Respondent is not licensed with the New York State Gaming Commission in any capacity.”
The lawsuit against Polymarket closely mirrors the one that New York filed against Kalshi in July. Polymarket provided Ars with a statement today in response to what it called a “copy/paste” lawsuit:
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. We didn’t run to preemptively sue the state—we chose to engage with them directly on the substance and address their concerns. They preferred the media hit. Any time the AG’s office wants to swing by, our door is open for a conversation about how we protect consumers and offer fair, transparent, and legal markets.
Supreme Court may decide matter for all states
New York’s lawsuit said Polymarket’s offering meets the legal definition of gambling under state law. A person “engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome,” the state law says.
The lawsuit said examples of bets offered by Polymarket include whether the Green Bay Packers would win a football game against the New York Giants, who would win the Super Bowl in February 2026, and who would win college basketball games such as the March 20, 2026 contest between Hofstra University and the University of Alabama.
The Supreme Court may ultimately decide whether states can restrict or prohibit sports gambling on prediction markets. While the US Court of Appeals for the Third Circuit ruled that New Jersey cannot regulate sports bets on prediction markets, the Ninth Circuit appeals court ruled that Nevada can stop Kalshi from allowing sports bets.
The circuit courts disagree on whether a sports bet on a prediction market meets the federal definition of a “swap,” which can only be regulated by the CFTC. New Jersey recently urged the Supreme Court to settle the matter once and for all. “Companies like Kalshi claim to offer legal sports betting in all 50 states, but they refuse to follow the gambling laws of any state,” New Jersey Attorney General Jennifer Davenport said at the time.
Jon BrodkinSenior IT Reporter
Jon BrodkinSenior IT Reporter
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
Source: arstechnica.com
