New York Attorney General Letitia James and Governor Kathy Hochul on Thursday filed a lawsuit against crypto-based prediction market Polymarket, accusing the platform of operating an unlicensed gambling business in the state, according to an announcement from the Attorney General's office.

An investigation by the Attorney General's office concluded that the platform's markets meet New York's legal definition of gambling, because users stake money on uncertain outcomes they cannot control.

According to the complaint, Polymarket never obtained a license from the New York State Gaming Commission and therefore avoided the taxes that licensed casinos and mobile sportsbooks pay. That revenue helps fund public schools, youth sports programs and problem gambling treatment. The court filing also states that the platform is open to aged 18 to 20, although New York requires mobile sports bettors to be at least 21.

"By skirting New York's laws, Polymarket is targeting the most vulnerable," James said. Hochul added that the company had "knowingly" violated state law and put underage users at risk.

The state is asking a court to bar Polymarket from operating as an unlicensed gambling business in New York. It is also seeking to force the company to forfeit its illegal gains, repay harmed users and pay fines equal to three times those gains. A court has yet to rule on any of those requests.

The lawsuit lands amid a broader regulatory push over crypto-powered prediction markets. The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) are both working to regulate the sector. Polymarket and rival Kalshi argue they are not gambling sites at all, but federally regulated exchanges offering "event contracts," a type of derivative — a classification that would place them under the CFTC rather than state gaming laws. The CFTC agrees with that framing and has joined the fight on the platforms' side: in 2026 it sued nine states, arguing that it should have exclusive nationwide authority over the industry. New York's action sets up a direct jurisdictional test: the same markets the CFTC treats as derivatives under its oversight are, in the state's view, an unlicensed gambling operation, and how courts resolve that conflict could determine whether prediction markets answer to state gaming regulators or to federal agencies.

Thursday's action is the latest in a string of New York enforcement efforts against gambling-adjacent platforms. James and Hochul sued rival prediction market Kalshi in July, and James sued Coinbase and Gemini in April over similar claims. Earlier this month, James secured $8 million from the leading operator of sweepstakes casinos.

Polymarket launched in the United States in December 2025, initially letting users bet on sporting events, with plans to expand into markets on a wide range of topics.

This article first appeared on Bitcoin Magazine and was written by Mathew Di Salvo.