New York, Polymarket sue each other over whether prediction markets in US are illegal gambling

New York Attorney-General Letitia James has filed a lawsuit against Polymarket, arguing that the prediction market platform operates without the required New York State Gaming Commission licenses. James contends that Polymarket's activities constitute illegal gambling and put New Yorkers, particularly underage individuals, at risk of problem gambling and financial, emotional, and physical harm.

Governor Kathy Hochul expressed concern over Polymarket's unlicensed operation, stating that it endangers New Yorkers and undermines federal rights.

Polymarket counters the lawsuit, asserting that the federal Commodity Futures Trading Commission (CFTC) holds exclusive authority to regulate prediction markets. In its response filed in Manhattan federal court, Polymarket claims that New York's actions would leave it with an "impossible choice" - either comply with state regulations and risk criminal liability or continue operations nationwide and face potential criminal charges.

Polymarket's Chief Legal Officer, Neal Kumar, also criticized New York's approach, saying the state preferred a "media hit."

James' lawsuit, the latest in a series of state efforts to regulate prediction markets, stems from the market's success in predicting the outcome of the 2024 presidential election, where it correctly forecasted Republican Donald Trump's victory over Democrat Kamala Harris. States are in conflict with the Trump administration and the CFTC over who should regulate the industry, potentially leading the US Supreme Court to decide.

Founded in 2020, Polymarket, which bills itself as "the world's largest prediction market," saw its operations halted for over three years before being granted permission to relaunch in December 2025 by the CFTC. According to estimates, Polymarket's business value exceeds US$20 billion.