New York has sued Polymarket, widening its campaign against prediction market platforms that offer sports event contracts without a state gambling license.
Gov. Kathy Hochul and Attorney General Letitia James announced the lawsuit on Thursday. The state alleges Polymarket is illegally operating an unlicensed gambling business in New York.
The lawsuit asks a court to stop Polymarket from operating without a license from the New York State Gaming Commission. It also seeks restitution, forfeiture of what the state calls “illegal gains” and fines equal to three times those gains.
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk,” Gov. Hochul said. “Nobody is above the law in our state.”
New York also objects to Polymarket allowing customers aged 18 to 20. Mobile sports betting in the state is restricted to people aged 21 and older.
New York expands prediction-market crackdown
The case extends an enforcement effort that began well before Thursday’s filing. James issued an industry warning in February saying unlicensed sports event contracts could violate state gambling laws.
New York sued Coinbase and Gemini in April over their prediction market businesses. Those cases were removed to federal court, where the state’s motions seeking their return to state court remained unresolved in September. Gov. Hochul also signed an April executive order restricting covered state employees from using non-public information for prediction market trading.
The state then sued Kalshi on July 31. Kalshi removed that action to federal court, where New York’s remand request was fully briefed but remained undecided this month.
A filing in the Kalshi case specified that New York was seeking at least $36 billion in compensatory damages, along with disgorgement and additional penalties. The Polymarket petition does not specify a total amount, but Front Office Sports reported, citing a source familiar with the matter, that the state is seeking at least $4.6 billion in damages.
That enforcement case is separate from Kalshi’s earlier federal challenge to New York. A Manhattan federal judge denied Kalshi’s request for a preliminary injunction in July.
Polymarket responds with its own federal lawsuit
Polymarket responded within hours by first removing New York’s case to federal court, then filing its own lawsuit in Manhattan federal court.
The company seeks declaratory and injunctive relief against James and New York gaming officials. Its complaint, like similar responses from other prediction market operators, argues the Commodity Exchange Act preempts state regulation of event contracts on Commodity Futures Trading Commission-designated contract markets.
The CFTC has taken a similar position. It sued New York in April, arguing federal commodities law gives the agency exclusive jurisdiction over event contracts traded on registered exchanges.
Polymarket says New York’s previous cases against Coinbase, Gemini and Kalshi create an imminent enforcement threat. Those proceedings sought injunctions, restitution, disgorgement and civil or criminal penalties over sports event contracts.
The company argues enforcement could force it either to stop serving New Yorkers or risk penalties for continuing federally regulated operations.
Polymarket says cutting off New York trading would reduce liquidity, damage customer relationships and disrupt existing positions. It also argues enforcement could affect banking and other commercial relationships beyond the state.
The two lawsuits put Polymarket directly into the broader dispute already confronting Kalshi, Coinbase and Gemini: whether federally regulated event contracts remain subject to state gambling law.
There’s a growing view that only the Supreme Court can ultimately answer that question. New Jersey has already asked the US Supreme Court to weigh in on the state/federal dispute, arguing that federal commodities law does not preempt states from regulating sports event contracts offered on CFTC-registered exchanges.