USA24 September, 20262 min read
New York Attorney General Letitia James And Governor Kathy Hochul Sue Polymarket Over Illegal Gambling
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New York sues Polymarket for operating an unlicensed gambling operation in the state. Plaintiffs seek to block Polymarket’s NY operations and recover alleged illicit gains.
New York sues Polymarket
New York Attorney General Letitia James and Governor Kathy Hochul sued Polymarket, alleging the prediction market is operating an illegal gambling operation in the state without a gambling license. New York asked a court to stop Polymarket from operating without a gambling license and to seek restitution, forfeiture of allegedly illegal gains, and financial penalties. New York argued Polymarket’s event contracts amount to gambling under state law because users are putting money on events with uncertain outcomes.
New York also alleged Polymarket lets people ages 18 to 20 use the platform, while New York requires users to be at least 21 to participate in mobile sports betting. Polymarket launched its U.S. platform in December 2025, and New York’s lawsuit came as the dispute over whether prediction markets should be regulated federally by the CFTC or subject to state gambling laws escalated.
State claims, company response
New York Governor Kathy Hochul said the state’s case accused Polymarket of targeting the most vulnerable and depriving New York families of critical services and support. New York Attorney General Letitia James said, "Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs," as the lawsuit framed the platform as exposing New Yorkers to risk. Polymarket’s chief legal officer Neal Kumar said the company would fight the suit and argued, "We believe in New York and we're staying here," while responding to what he called a "copy/paste a recycled lawsuit."
Polymarket also argued in federal court that states do not have the power to regulate swaps, and the company said the enforcement New York seeks is "enforcement Congress has expressly prohibited." CNBC reported that Polymarket later filed its own civil suit against James and the New York State Gaming Commission, arguing that federally regulated derivatives exchanges should not be treated as state-regulated gambling.
CFTC fight and penalties
New York’s lawsuit sought a court order stopping Polymarket from operating as an unlicensed gambling business and required the company to pay fines, forfeit all illegal gains, and pay restitution to users. New York’s complaint asked for fines equal to three times Polymarket gains, and CNBC reported that the state also sought $100,000 for each attempt or offer of "sports wagering or mobile sports wagering" in New York. New York’s case positioned the dispute as a jurisdictional clash, with Polymarket insisting its event contracts are federally regulated derivatives outside the scope of state gaming laws.
“The state also wants Polymarket to give up what it said are illegally earned gains, pay restitution to customers and face fines equal to three times those gains.”
The Ars Technica report said the Trump administration sided with prediction markets, with the Commodity Futures Trading Commission asserting exclusive jurisdiction over the platforms. CNBC reported that the CFTC retaliated by suing several states, and the Polymarket dispute added to a broader fight over whether federal or state regulators control prediction markets.