New York sues Polymarket, which counters with federal challenge

New York has sued QCX LLC, doing business as Polymarket US, accusing the prediction-market platform of operating an unlicensed gambling business by offering sports and other event contracts to state residents. The petition seeks to permanently bar the alleged conduct, obtain restitution for customers and recover penalties that could include three times the company’s alleged gains.

Attorney General Letitia James brought the case on behalf of the People of the State of New York under Executive Law §63(12), and Gov. Kathy Hochul announced it with her on Sept. 24. The state contends that users stake money on uncertain events beyond their control, making Polymarket’s contracts gambling under New York law rather than a permissible alternative product.

The petition alleges that Polymarket was not licensed by the New York State Gaming Commission, despite advertising sports wagering to New Yorkers online, including on X, from at least July 2025. It also says the company promoted itself as “legal in all 50 states” and launched its US app with the promise of sports markets followed by markets on everything.

New York’s complaint says Polymarket made its service available to 18- to 20-year-olds, while state law bars people under 21 from mobile sports wagering. Hochul said the alleged unlicensed operation put New Yorkers at risk, particularly underage users vulnerable to problem gambling.

The state is asking for a full accounting of bets and customer losses, disgorgement, damages, costs and a $100,000 penalty for each unauthorized offer or attempted offer of sports or mobile sports wagering. New York generally prohibits gambling except for specified licensed activities, and its Gaming Commission has jurisdiction over sports wagering; the petition notes that the state has nine mobile-sports licensees subject to statutory and regulatory requirements.

Polymarket responded by filing a federal lawsuit against New York and Gaming Commission officials, according to CNBC. It argues that its event contracts are federally regulated derivatives and that states lack authority to regulate them as swaps; it also sought to move the state action from Manhattan to the US District Court for the Southern District of New York.

The company’s chief legal officer, Neal Kumar, said Polymarket was founded in a New York City apartment, employs more than 350 people in the state and would remain there. The action followed New York’s July lawsuit against Kalshi, as we reported.

The two cases sit within a broader dispute over whether sports-based event contracts should be regulated as state gambling products or federally supervised financial instruments. A June CFTC proposal described prediction markets as a rapidly growing asset class and said trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025, while also proposing rules for event contracts, including those involving gaming.