New York state filed a civil lawsuit against prediction market platform Polymarket on Thursday, alleging the company operates an illegal gambling operation in violation of state law — and Polymarket responded the same day by filing its own suit against the state in federal court.
The action from Attorney General Letitia James follows a nearly identical suit New York filed against Polymarket's primary competitor, Kalshi, roughly two months ago. The state has also levied similar allegations against Coinbase and Gemini in recent months, underscoring a broader regulatory offensive by New York against platforms it considers unlicensed gambling operators.
"By skirting New York's laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support," James said in a statement Thursday.
Governor Kathy Hochul added that Polymarket had "done more than just knowingly violate state law," arguing the platform put New Yorkers at risk, "especially those underage who are most vulnerable to problem gaming."
New York's lawsuit asks for penalties including three times the amount of any Polymarket gains, as well as $100,000 for each attempt or offer of "sports wagering or mobile sports wagering" in the state. The filing also demands that Polymarket provide a full accounting of all trades placed on the platform, the money lost by users, and the revenue the company earned.
Polymarket pushed back swiftly. The company sought to move New York's lawsuit from state court in Manhattan to U.S. District Court for the Southern District of New York, a federal venue. It also separately filed its own civil suit against James and officials at the New York State Gaming Commission, arguing that states lack the authority to regulate swaps — the legal classification Polymarket and other prediction market operators apply to their event contracts.
"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 said in its filing.
The company further called the state's characterization of event-contract trading as "unregulated gambling" an "erroneous theory."
Polymarket U.S. launched in December 2025 and operates under regulation by the Commodity Futures Trading Commission, the federal agency that oversees prediction market platforms. The CFTC did not immediately respond to a request for comment Thursday. The federal regulator has separately sued several states in recent months, asserting its authority over prediction markets against competing state-level enforcement efforts.
Neal Kumar, Polymarket's chief legal officer, framed the company's response in blunt terms. "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 state's suit does not cover Polymarket's older offshore predictions platform, which was founded in 2020 and predates the company's U.S.-regulated entity.
The outcome of the legal battle — and parallel disputes involving Kalshi and other platforms — will likely determine whether state gambling regulators or the CFTC holds primary jurisdiction over the fast-expanding prediction markets industry, a question federal courts have yet to definitively resolve.
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