New York Attorney General Letitia James and Governor Kathy Hochul have sued Polymarket US, alleging that it is operating an unlicensed gambling business in the state. According to the New York Attorney General’s Office, the case was filed against QCX LLC, which does business as Polymarket US. New York is seeking to stop the company’s operations in the state and recover alleged illegal gains, alongside financial penalties and restitution for affected users.
New York alleges that Polymarket’s prediction markets qualify as gambling under state law and are being offered without a state gaming licence.
The Attorney General is seeking to stop the platform’s unlicensed operations in New York and recover alleged illegal gains.
State officials also raised concerns about access for users aged 18 to 20, when New York requires mobile sports betting customers to be at least 21.
Polymarket is challenging New York’s authority and maintains that federally regulated prediction markets fall under Commodity Futures Trading Commission oversight.
The dispute adds to a growing series of US cases testing whether federal commodities law prevents states from applying their gambling rules to event contracts.
The Attorney General’s case centres on how Polymarket’s event contracts should be classified under New York law.
State officials argue that users put money on uncertain outcomes outside their control and receive a payout when their prediction is correct. On that basis, the lawsuit alleges that the activity meets New York’s legal definition of gambling.
Polymarket returned to the US market in December 2025 and initially offered contracts tied to sporting events, with plans to expand into additional categories. New York says the company has not obtained a licence from the New York State Gaming Commission despite offering products that the state considers gambling.
The dispute follows similar enforcement elsewhere in the US. In September, Missouri ordered Polymarket and five other prediction market operators to halt sports event contracts, arguing that the products constituted sports wagering offered without the required state licences.
New York’s case therefore forms part of a broader state-level effort to determine whether prediction market products involving sports can operate outside traditional gaming regulation.
The lawsuit also raises questions around the safeguards applied to prediction market users.
The Attorney General’s Office says Polymarket allows users aged between 18 and 20 to access its markets. New York requires customers to be at least 21 to participate in mobile sports betting, creating another point of disagreement over whether prediction markets should follow state gambling requirements.
State officials also argue that licensed gambling businesses contribute tax revenue towards public programmes while complying with requirements around consumer protection and responsible gambling.
Attorney General Letitia 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.
The state is asking the court to require Polymarket to forfeit alleged illegal gains, provide restitution to consumers and pay financial penalties.
The dispute is not limited to New York’s enforcement action. Polymarket has also filed its own federal challenge, maintaining that the Commodity Futures Trading Commission has authority over its federally regulated prediction market activities. That argument goes to the centre of the US prediction market debate.
Platforms operating through the federal derivatives framework contend that event contracts traded on regulated markets fall under commodities law. State regulators, meanwhile, argue that products linked to sporting events can still constitute gambling and should remain subject to state licensing, taxation and consumer-protection requirements.
The same disagreement recently reached lawmakers in Texas, where a Senate hearing examined whether prediction markets should fall under state gambling law or federal derivatives regulation. The hearing highlighted the growing difficulty operators face when federal and state authorities interpret similar products differently.
Federal courts are increasingly being asked to define the limits of state authority.
Earlier in September, an Iowa federal court rejected Kalshi’s attempt to temporarily block state gambling enforcement. The ruling did not decide the underlying case. Still, the court found that Kalshi had not shown a sufficient likelihood of success at that stage on its argument that federal commodities law pre-empts Iowa gambling regulation.
Other disputes around the country have produced different outcomes, leaving operators without a single nationwide answer on how sports-related event contracts will ultimately be treated.
For prediction market companies and their B2B partners, the practical issue extends beyond courtroom arguments. State-level requirements can affect market access, age verification, geolocation, taxation, responsible gambling controls and the range of contracts an operator can offer.
New York’s action against Polymarket therefore represents more than another state enforcement case. It adds a major market to the growing legal contest over whether prediction markets can rely primarily on a federal regulatory framework or must also comply with individual state gambling regimes.
Until higher courts or federal legislation provide clearer boundaries, prediction market operators will likely continue to face a fragmented regulatory environment in which market access can vary considerably from one state to another.
