New York Attorney General Letitia James and Governor Kathy Hochul sued Polymarket US, asking a state court to block the prediction market from operating without a gambling license and to order fines, forfeiture and user restitution.
New York Attorney General Letitia James and Governor Kathy Hochul opened a new front in the state's campaign against prediction markets on Thursday, suing Polymarket US and asking a state court to block the platform from operating in New York as an unlicensed gambling operation. The petition, filed against QCX LLC, which does business as Polymarket US, accuses the company of booking sports wagers and event bets from New Yorkers without a license from the New York State Gaming Commission. State lawyers want the platform shut down in New York, fined, stripped of its gains and ordered to pay restitution to users.
The filing escalates a year-long conflict between Albany and a fast-growing industry that lets people buy and sell contracts tied to the outcome of sports, elections, weather and technology. Polymarket answered within hours: it will fight.
Investigators with the Office of the Attorney General concluded that Polymarket's contracts meet the legal definition of gambling, because the events users bet on turn on outcomes no bettor controls. Under state law, that makes the platform a gambling business, and gambling businesses need a license.
Polymarket never obtained one, the suit states, which also means it has not paid the taxes that licensed casinos and mobile sportsbooks pay. That revenue funds public schools, sports programs for underserved children and treatment for problem gambling.
Age is Albany's second complaint. Polymarket allows users between 18 and 20 to trade on its markets, while New York requires bettors to be at least 21 to place a mobile sports wager. James pointed to federal research tying early exposure to gambling with higher rates of depression, anxiety and financial stress, and to findings that about 32 percent of people with a gambling disorder report suicidal thoughts.
"By skirting New York's laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support," James said. Hochul said the company had put New Yorkers at risk, especially those underage, and that "nobody is above the law in our state."
The state is seeking fines equal to three times the gains Polymarket made through the alleged violations, along with forfeiture of those gains and restitution for harmed users.
Polymarket and its rivals argue that states have no authority to police them at all, because the contracts are regulated in Washington by the Commodity Futures Trading Commission (CFTC). The platforms describe their business as trading rather than betting. Customers take positions against each other, prices move with supply and demand, and the exchange collects a fee -- closer, they say, to a stock market than to a sportsbook.
Prediction markets have grown from a niche betting corner into a mainstream financial product over the past two years. Platforms now list contracts on elections, interest rates, court verdicts and sporting events, and trading volume has climbed as the contracts are marketed to ordinary retail customers. That growth has produced enthusiasm among traders and alarm among state regulators, who see licensed gambling revenue and consumer protections slipping outside their reach.
The CFTC has opposed state-by-state regulation of the industry, a posture that has let prediction markets expand nationwide while attorneys general test their leverage in court. New York has already pressed the same argument against Kalshi and against Coinbase and Gemini this year, each time alleging that the companies run gambling platforms without a state license. The result is a widening split between states that want to license and tax the business and a federal regulator that treats event contracts as a financial product.
Albany's theory in each case is the same. If a product lets a person stake money on an uncertain outcome for a chance at a payout, the state says it is gambling and must be licensed, taxed and supervised. The platforms call that a misreading of financial law.
Polymarket launched its United States service in December 2025, billing itself as a destination for "sports -- followed by markets on everything." Its chief legal officer, Neal Kumar, rejected New York's characterization.
"We'll fight for our users," Kumar said. He noted that Polymarket was founded in a small New York City apartment and now employs more than 350 people in the state. "We believe in New York and we're staying here."
Thursday's case is the latest in a series of actions Albany has aimed at gambling and prediction markets over the past year. New York sued Kalshi in July 2026 and Coinbase and Gemini in April 2026, went after the video game developer Valve in January 2026 over gambling-like features popular with teenagers, and announced an $8 million settlement with a leading operator of unlicensed sweepstakes casinos in September 2026. The New York City Council opened its own inquiry into prediction market marketing practices in August 2026, and Hochul signed an executive order in April 2026 barring state employees from trading on inside information through the platforms.
For the industry, each case carries the same stakes: the cost and complexity of state-by-state licensing, or a court order that shuts a platform out of a major market. New York is the country's largest media market and a center of finance and technology, making it an expensive state to leave. Polymarket's response this week makes clear it intends to litigate rather than exit.
The petition now goes to a state judge, who will weigh whether the platform must stop serving New York customers while the case proceeds. Three questions matter most. One, whether the court accepts New York's definition of event contracts as gambling or the industry's argument that federal oversight preempts state law. Two, whether the CFTC files a formal position, which would turn a state consumer case into a federalism fight. Three, whether other states copy Albany's playbook; several have already studied curbs on prediction markets, and a win in New York would hand them a template.
For now, Polymarket remains live in New York and its contracts still trade. The company has pledged to stay, the state has pledged to keep pressing, and the courts will decide which of them is right.
New York Attorney General Letitia James and Governor Kathy Hochul sued Polymarket US, asking a state court to block the prediction market from operating without a gambling license and to order fines, forfeiture and user restitution.
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