New York Attorney General Letitia James sued Polymarket on Thursday in state court in Manhattan, alleging the prediction market platform ran an unlicensed gambling operation. Hours later, Polymarket filed its own lawsuit in Manhattan federal court, arguing that the CFTC holds exclusive authority to regulate prediction markets and that New York has no power to enforce its gambling laws against the company.
James’ complaint accuses Polymarket of operating without a required New York State Gaming Commission license while encouraging problem gambling, particularly among people under 21, and putting users’ financial, emotional, and physical health at risk. Governor Kathy Hochul backed the filing, framing the platform’s conduct as a knowing violation of state law that leaves underage users especially exposed. New York’s suit points to specific Polymarket contracts as evidence, including a wager on whether the Los Angeles Dodgers would beat the New York Mets by more than 1.5 runs on July 24, 2026 – a bet the Dodgers settled by winning 4-2. The state is seeking civil fines, forfeiture of Polymarket’s alleged illegal gains, and full restitution to customers, remedies that could hit the platform’s New York revenue directly if a court sides with James. The case sits alongside a broader debate, detailed in the CFTC’s own framework for event contracts, over whether federal financial regulation or state gambling law governs these markets.
A Pattern Across Three Prior Cases
Thursday’s filing extends a campaign James began earlier this year against three other platforms. Kalshi, Coinbase Financial Markets, and Gemini Titan all faced nearly identical allegations: no state gaming license, exposure of underage users to gambling harm, and operation in defiance of New York’s licensing regime. That earlier fight is laid out in New York’s parallel lawsuit against Kalshi, and other cities have joined in too, including the claims described in Baltimore’s suit against both Kalshi and Polymarket.
Polymarket, founded in 2020, spent more than three years outside the U.S. market before relaunching in December 2025, following a green light from the CFTC three months earlier. The company describes itself as the world’s largest prediction market. It has also drawn attention for an investment from 1789 Capital, a venture firm backed by Donald Trump Jr., who serves as a partner there and as a Polymarket adviser.
Polymarket’s Federal Counterattack
In its own filing, Polymarket argued that New York’s threat of enforcement forces an impossible choice: comply with state regulators and undercut its federal right to operate nationwide, or keep operating and risk what the company called potentially huge criminal liability. The lawsuit characterizes New York’s move as an extraordinary assertion of state power that federal law forecloses. Polymarket’s chief legal officer, Neal Kumar, said the company had tried to resolve its differences with state officials directly but that they preferred pursuing a public confrontation instead.
New York’s underlying theory is that prediction contracts amount to gambling in substance, since users wager on outcomes they don’t control and expect a payout if they guess right. The state’s complaint also flags that Polymarket allowed 18- to 20-year-olds onto its platform, despite New York setting 21 as the minimum age for mobile sports betting.
Where This Goes Next
The two cases will now proceed on separate tracks – James’ claims in New York state court, Polymarket’s declaratory action in federal court – with no hearing date yet set in either. The core question, whether state gambling law can reach a platform that claims exclusive federal oversight, remains unresolved nationally: federal appeals courts are currently split on the issue, a divide significant enough that the U.S. Supreme Court may ultimately need to settle it.
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