Summary
- New York Attorney General Letitia James and Governor Kathy Hochul have filed a lawsuit against Polymarket, asserting that it operates an unlicensed gambling platform allowing users to wager on uncertain events while avoiding the regulations and taxes applicable to casinos and sportsbooks.
- The state seeks to prohibit Polymarket from functioning in New York, demand it surrender its profits, reimburse users, and incur fines amounting to three times its earnings.
- This lawsuit expands the state’s ongoing efforts against prediction markets, including a $36 billion legal action against Kalshi and lawsuits against cryptocurrency exchanges Coinbase and Gemini.
New York has initiated legal proceedings against Polymarket, with Attorney General Letitia James and Governor Kathy Hochul announcing a lawsuit on Wednesday. The complaint alleges that the prediction market operates as an unlicensed gambling entity within the state.
Filed against QCX LLC, which operates as Polymarket US, the lawsuit claims that the platform’s markets fall under New York’s gambling definition, as users risk money on unpredictable outcomes beyond their control.
Myriad: When will Polymarket TGE? Make your prediction here.Launched in the U.S. in December 2025, Polymarket allows betting on various events, including sports, and claims to cover "everything." According to the attorney general's office, investigations revealed that the platform is an illegal operation that poses serious financial and personal risks to New Yorkers, including those under the legal gambling age of 21.
"By bypassing New York's laws, Polymarket is exploiting the most vulnerable individuals and depriving New York families of essential services and support," James stated, highlighting that gambling revenue funds educational and public benefit initiatives. Hochul emphasized that Polymarket has "exposed New Yorkers to risk, particularly underage individuals who are most susceptible to gambling problems."
The state is petitioning the court to prevent Polymarket from continuing operations in New York, compel it to forfeit its earnings, provide restitution to users, and impose fines equating to three times the profits it made from its alleged illegal activities.
Officials contend that the company has evaded the licensing requirements and taxes that regulated casinos and mobile sportsbooks are obligated to pay.
Prediction markets allow users to trade contracts based on the outcomes of real-world events, such as elections and sports results. Each contract settles at a fixed value once the event concludes, usually at $1 for a successful outcome and $0 for an unsuccessful one, effectively turning the contract's price into an implied probability.
This sector has evolved from a niche interest within the cryptocurrency community to a significant market. Both Kalshi and Polymarket have achieved multi-billion-dollar valuations after substantial fundraising efforts, with Bernstein analysts predicting that trading volumes in prediction markets could hit $1 trillion by 2030, generating nearly $10.8 billion in revenue.
The lawsuit against Polymarket is part of a broader crackdown by James and Hochul on prediction markets. Earlier this year, they sued Kalshi for $36 billion over similar allegations of illegal gambling.
In addition, New York also took legal action against Coinbase and Gemini in April regarding their prediction market offerings, amidst a series of state-level challenges that have emerged in places like Kentucky, Illinois, and other regions.
The platforms generally argue that they function as federally regulated entities under the Commodity Futures Trading Commission, leading to jurisdictional conflicts that have attracted the interest of the Trump administration, which has supported the industry's position.
This legal battle unfolds as the CFTC has expressed caution about certain event contracts, with staff recently warning that "mention" contracts could be prone to manipulation.