New York Attorney General Letitia James has filed a lawsuit against prediction-market operator Polymarket, alleging the company ran an unlicensed gambling operation by offering event contracts on sporting events to state residents without approval from the New York State Gaming Commission. The state is seeking to halt the operation, recover alleged illegal gains, secure restitution for affected users and impose fines equal to three times the profits from the alleged violations. Polymarket has countersued, arguing that the U.S. Commodity Futures Trading Commission holds exclusive regulatory authority over its contracts.
New York Attorney General Letitia James has filed a lawsuit against prediction-market operator Polymarket. The state alleges the company ran an unlicensed gambling operation by offering event contracts on sporting events to New York residents without approval from the New York State Gaming Commission, according to a report by BitKE.
The lawsuit claims Polymarket’s event contracts meet the legal definition of gambling under New York law. The state argues the outcomes are uncertain and outside the control of bettors.
New York is seeking to stop Polymarket from operating as an unlicensed gambling business. The state is also pursuing forfeiture of alleged illegal gains, restitution for affected users and fines equal to three times the gains the company made through the alleged violations.
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law. They have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming,” Governor Kathy Hochul said in a press release announcing the lawsuit, according to the source.
New York officials also said Polymarket is “sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do.” The state added: “This tax revenue from gambling regulation funds public schools, sports programs for underserved youth and problem gambling education and treatment.”
Polymarket launched its U.S. platform in December 2025, according to BitKE. The company initially offered contracts tied to sporting events before expanding into other markets.
The lawsuit follows a similar action New York brought against rival prediction-market operator Kalshi in July 2026. The state has also pursued cases involving prediction-market businesses operated by Coinbase and Gemini.
Polymarket has filed its own lawsuit against James and other New York officials. The company is seeking to block state regulation of its prediction markets and argues that the U.S. Commodity Futures Trading Commission has exclusive authority over the contracts.
The dispute reflects a widening conflict between state regulators and federal authorities over the legal status of prediction markets. The CFTC has asserted federal authority over the sector. Several states have argued that contracts allowing users to wager on sports and other events fall within state gambling laws.
The competing lawsuits could deepen a growing split among U.S. courts over which level of government holds regulatory authority over prediction markets. That split could ultimately lead to a Supreme Court decision on the industry’s regulatory framework. Such a ruling would carry significant implications for licensed casino and sports betting operators, as well as for prediction-market platforms seeking to operate outside state gambling laws.
