New York Sues Polymarket Over Unlicensed Gambling Operation

The Lawsuit

New York Attorney General Letitia James and Governor Kathy Hochul filed suit Thursday against Polymarket, alleging the crypto-based prediction market runs an unlicensed gambling operation in violation of state law. The Attorney General's investigation concluded that Polymarket's markets — where users stake money on uncertain outcomes they cannot control — meet New York's legal definition of gambling.

Polymarket never obtained a license from the New York State Gaming Commission, the complaint states, allowing it to avoid taxes that licensed casinos and mobile sportsbooks pay. Those revenues fund public schools, youth sports programs, and problem gambling treatment.

Regulatory Tug-of-War

The action arrives as the SEC and CFTC work to establish federal oversight of crypto-powered prediction markets. Polymarket and rival Kalshi contend they are federally regulated exchanges offering "event contracts," a type of derivative that would place them under CFTC jurisdiction rather than state gaming statutes. The CFTC agrees; in 2026 it sued nine states arguing for exclusive nationwide authority over the industry.

Underage Access Allegations

Thursday's complaint also highlights that Polymarket allows users aged 18 to 20, while New York requires mobile sports bettors to be at least 21. "By skirting New York's laws, Polymarket is targeting the most vulnerable," James said. Hochul added the company had "knowingly" violated state law and put underage users at risk.

Broader Crackdown

The state is asking a court to bar Polymarket from operating as an unlicensed gambling business in New York, forfeit illegal gains, repay harmed users, and pay fines equal to three times those gains. The lawsuit is the latest in a string of New York actions against gambling-adjacent platforms. James and Hochul sued Kalshi in July, and James sued Coinbase and Gemini in April over similar claims. Earlier this month, James secured $8 million from the leading operator of sweepstakes casinos.

Polymarket launched in the United States in December 2025, initially offering sports event markets with plans to expand into a wider range of topics.

Source: Bitcoin Magazine