New York sued prediction market operator Polymarket on Sept. 24, alleging that its U.S. prediction market violates state gambling laws. Attorney General Letitia James and Governor Kathy Hochul said the platform operates without a license from the New York State Gaming Commission, and the state is seeking a court order restricting Polymarket's operations along with financial penalties.

The case deepens a widening dispute over how prediction markets should be regulated. Polymarket US holds federal registration as a Commodity Futures Trading Commission (CFTC)-designated contract market, but New York argues that the registration does not displace its gambling laws. At stake is a question that shapes the entire sector: whether federal CFTC registration alone is enough to operate a prediction market nationwide, or whether platforms must also clear state-by-state gambling licensing.

New York Alleges Illegal Gambling Operation

According to James, Polymarket is running an illegal gambling platform and “skirting” the laws of the state. The allegations were laid out in a joint announcement from the Office of the Attorney General, which said its investigation shows that Polymarket exposes New Yorkers, including those below the gambling age, to personal and financial risk.

New York sets its gambling age at 21, while Polymarket allows anyone above 18 to register and use the platform — meaning users aged 18–20 can access markets despite the state's sports-betting minimum. That gap between the state's age rule and the platform's own registration threshold is a core element of the consumer-protection argument New York is advancing.

“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law; they have put New Yorkers at risk,” James said.

The lawsuit seeks to block the prediction platform from operating in the state and to stop Polymarket from advertising until it registers. New York is also seeking a fine, restitution for users, and forfeiture of all of the platform's gains.

Hochul separately emphasized her position in a post on X, stating, “Calling it a ‘prediction market’ doesn’t change the facts. If you’re taking bets in New York, our gambling laws apply.”

Prediction Markets Face Stiff Opposition From US States

The lawsuit against Polymarket is only the latest legal action by New York against prediction market platforms. The state announced a similar lawsuit against Kalshi in July 2026, and before that, it had sued Coinbase and Gemini on the same grounds. Hochul had also issued an executive order in April 2026 banning all state employees from engaging in insider trading through prediction platforms.

New York is far from the only state pursuing prediction platforms. More than 10 states have instituted legal action against the platforms, claiming that they are offering illegal gambling. Most of these lawsuits revolve around sports betting, which states argue falls under their jurisdiction.

While prediction markets became popular through markets on the 2024 US elections, sports now account for the majority of their trading volume — a shift that puts the platforms' largest line of business squarely within the gambling jurisdiction states claim for themselves.

The CFTC has backed prediction market platforms in their argument that what they offer are derivatives, which fall under federal jurisdiction. Courts so far remain divided on prediction markets and sports betting, and with even federal appeals courts holding divergent views, the Supreme Court is expected to eventually decide the matter. In the near term, the markers to watch are whether a New York court grants the state's requested order halting Polymarket's operations and advertising, and whether additional states add their own legal actions.

The allegations remain subject to ongoing litigation. This article is for informational purposes and does not constitute legal, financial, or investment advice.

Source: The Market Periodical