New York filed a lawsuit against prediction market operator Polymarket on Thursday, alleging the platform is operating an unlicensed gambling business in the state.

The suit was brought by state Attorney General Letitia James and Governor Kathy Hochul against Polymarket's U.S. business. The petition, filed against QCX LLC, which does business as Polymarket US, asks a court to block the company from operating in New York without a gambling license, according to the court filing published by the Attorney General's office.

The state is also seeking restitution for customers, forfeiture of what it describes as illegally earned gains, and financial penalties equal to three times amounts. If a court grants the state's request, Polymarket would have to stop operating in New York unless it obtains a gambling license.

Polymarket launched its U.S. platform in December 2025, offering markets that let users put money on the outcomes of sporting events, and said at the time that it planned to expand into other types of markets.

New York argued those contracts amount to gambling under state law because users are putting money on events with uncertain outcomes. The state also said Polymarket lets people ages 18 to 20 use the platform, while New York requires users to be at least 21 to participate in mobile sports betting.

A Polymarket spokesperson did not immediately return a request for comment.

The lawsuit comes less than a year after Polymarket returned to the U.S. market.

A widening regulatory battle

The case adds to a growing fight between prediction markets and state gambling regulators over who has the authority to oversee the products, and over whether the industry should be regulated federally by the Commodity Futures Trading Commission (CFTC) or fall under state gambling laws.

Prediction market companies argue that their event contracts are financial products overseen at the federal level by the CFTC. States have taken a different view, particularly when the contracts involve sports, arguing that the products are effectively bets and must follow state gambling rules. For the platforms, the stakes are operational: losing would mean complying with state gambling rules, including licensing requirements, while prevailing would keep their products under federal oversight.

New York has been one of the most active states in that fight. The state sued prediction market provider Kalshi in July after negotiations between the company and Hochul's office broke down, seeking as much as $36 billion in penalties and disgorgement. Many of these court cases have gone to appeals courts, and a recent case between Kalshi and New Jersey has been appealed to the U.S. Supreme Court. The case against Polymarket hands the courts another test of that same question.

"Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs," James said in a statement.

This article is based on reporting published by CoinDesk.