<p>New York Attorney General Letitia James has filed a lawsuit against prediction market company Polymarket, alleging that the company is operating an illegal gambling operation in the state and offering unlicensed betting markets to New Yorkers.</p>
<p>The lawsuit represents a continuing legal challenge for prediction market companies as states and federal regulators debate whether event contracts should be classified as gambling under state laws or as financial products regulated by the federal government.</p>
<p>Polymarket is the second significant prediction market company targeted by James; her office previously sued rival company Kalshi over similar allegations regarding the legality of its event contracts. However, the two cases are separate lawsuits.</p>
<p>Prediction markets enable users to buy and sell contracts based on the outcomes of real-world events, such as sports contests and elections. The companies involved argue that these contracts are financial products rather than traditional wagers.</p>
<p>“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” James stated. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.”</p>
<p>Governor Kathy Hochul (D-NY) also supported the lawsuit, claiming that Polymarket is operating an unlicensed gambling business.</p>
<p>“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.</p>
<p>Polymarket has disputed the allegations, asserting that the attorney general’s office is reusing arguments from its earlier case against Kalshi.</p>
<p>“While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users,” said Neal Kumar, Polymarket’s chief legal officer. “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.”</p>
<p>The lawsuit claims that Polymarket has advertised itself as a sports betting platform for over a year.</p>
<p>“On August 17, 2025, Polymarket posted on its X.com account an advertisement for the launch of its U.S.-based mobile application, stating ‘BAD NEWS (For sportsbooks): Polymarket is coming home to the US. Be the first to know when. TRADE EVERY FOOTBALL GAME IN ALL 50 STATES,’” according to the court filing.</p>
<p>The Polymarket case arises amid ongoing disputes involving prediction market companies, state governments, and federal regulators regarding jurisdiction over the expanding industry.</p>
<p>The litigation is centered on the Commodity Exchange Act, which grants the federal government authority over certain derivatives and event contracts. The Commodity Futures Trading Commission (CFTC) has claimed jurisdiction over federally regulated prediction markets, while several states maintain that their gambling laws still apply.</p>
<p>This federal-state conflict has led to separate litigation. In April, the CFTC sued New York after state officials attempted to enforce gambling laws against federally regulated exchanges through cease-and-desist letters and lawsuits.</p>
<p>The federal agency seeks a declaration that federal law preempts New York’s gambling laws in this context, as well as an injunction preventing the state from taking enforcement action against CFTC-registered exchanges.</p>
<p>“CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets,” said CFTC Chairman Michael Selig. “The CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”</p>