The state of New York sued Polymarket U.S. on Thursday, accusing the company of operating an illegal gambling platform without a state license. The move came less than two months after launching a similar legal challenge against rival Kalshi.
The lawsuit, announced by New York Attorney General Letitia James and Governor Kathy Hochul, marks the latest escalation in a widening battle over whether prediction markets should be regulated as federally supervised financial exchanges or as gambling operations subject to state laws.
"By skirting New York's laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support," James said in announcing the case. According to the attorney general's office, Polymarket's contracts qualify as gambling under New York law because users put money on uncertain events whose outcomes are outside their control.
The state says Polymarket has not obtained a license from the New York State Gaming Commission and therefore does not operate under the same regulatory and tax requirements imposed on licensed casinos and mobile sports betting companies.
The lawsuit also focuses on Polymarket's minimum age requirement. The platform allows customers ages 18 and older to participate, while New York requires bettors to be at least 21 to engage in mobile sports wagering.
"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," Hochul said.
New York is asking the court to stop Polymarket from operating an unlicensed gambling business in the state. It is also seeking restitution for consumers, forfeiture of allegedly illegal gains and financial penalties. The complaint seeks fines equal to three times the gains Polymarket allegedly obtained through unlawful activity.
The case follows New York's July 31 lawsuit against Kalshi, another major prediction-market operator. In that case, the state similarly alleged that Kalshi was offering unlicensed gambling while presenting its products as federally regulated event contracts.
Polymarket U.S. launched in December 2025 and operates under federal commodities regulation. Prediction-market companies argue that event contracts offered through federally regulated exchanges fall under the jurisdiction of the Commodity Futures Trading Commission, rather than individual state gambling regulators.
States including New York have challenged that interpretation, particularly when contracts allow customers to wager on sporting events in ways that closely resemble conventional sports betting.
State-regulated sportsbooks must comply with licensing requirements. Prediction-market operators contend that their federally regulated contracts fall under a different legal framework. Polymarket rejected New York's allegations and indicated it plans to fight the case.
"Polymarket was founded in a tiny NYC apartment and now has more than 350 employees here, embodying why people and businesses come here to make it," Neal Kumar, Polymarket's chief legal officer, said in a statement. "We believe in New York and we're staying here." Kumar called the attorney general's action a "copy/paste" of an earlier lawsuit and said the company would fight for its users.
