New York sued Polymarket on 24 September, alleging that its US operation is an unlicensed gambling business. The petition was filed in New York County court against QCX LLC — the CFTC-licensed exchange Polymarket acquired to relaunch in the United States as Polymarket US — and was announced jointly by Governor Kathy Hochul and Attorney General Letitia James. The state is asking for an order stopping the operation, plus fines, forfeiture of “all illegal gains,” and restitution to users.
It is nearly the same filing New York made against Kalshi in July, which is the substance of Polymarket’s defence as much as the law. The company told Ars Technica the suit was a “copy/paste” of a “recycled” complaint, noted that it employs more than 350 people in New York, and said it would “fight for our users.”
The state’s argument is definitional
New York’s case rests on the state’s own definition of gambling: staking something of value on “the outcome of a contest of chance or a future contingent event not under his control or influence” in exchange for something of value if a certain outcome occurs. The petition says Polymarket “seeks to avoid the legal and financial consequences of New York’s close regulation of gambling by offering what is quintessentially wagering under the guise of ’event contracts’ on a ‘prediction market,’” and notes the company holds no licence from the New York State Gaming Commission “in any capacity.”
The contracts named in the filing are ordinary sports bets under other labels: whether the Green Bay Packers would beat the New York Giants, who would win the Super Bowl in February 2026, and college basketball games including Hofstra against Alabama on 20 March 2026.
The two harms the state names
The petition does not argue gambling is broadly bad. It identifies two specific consequences of operating without a licence.
The first is age. Polymarket is “available to users between the ages of 18–20, even though New York law requires a person to be at least 21 years old to participate in mobile sports betting,” the state says, exposing younger users to gambling’s “damaging effects on their mental and financial well-being.” A licensed operator in New York is barred from that age group; an unlicensed one is not, and the state’s own theory of harm is that the younger cohort is more vulnerable to problem gambling.
The second is money that does not get paid. Polymarket is “sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do,” and “this tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment.” That is the part of the legalisation bargain that unlicensed operation removes entirely: the revenue exists because the harm exists, and the treatment funding is financed out of the losses.
A federal agency on the other side
The fight is not only state versus operator. The Commodity Futures Trading Commission asserts exclusive jurisdiction over the platforms, and in August it declared a “market emergency” in New York in an attempt to stop the state applying its gambling laws to Kalshi. The federal appeals courts are split: the Third Circuit held that New Jersey cannot regulate sports bets on prediction markets, while the Ninth Circuit held that Nevada can stop Kalshi offering sports bets there. New Jersey has asked the Supreme Court to settle whether a sports bet on a prediction market is a federally regulated “swap.”
Polymarket’s own history sits inside that ambiguity. Its main exchange has been effectively unavailable in the US since 2022, when the CFTC ruled it an illegally unregistered exchange; the site is view-only domestically. The US product exists because Polymarket bought QCX, a CFTC-licensed firm, for $112 million in 2025, and it is now seeking the CFTC’s permission to bring the main exchange back.
The advertising has run ahead of the legality. The Wall Street Journal reported in June that Polymarket promoted itself in the US with a campaign that paid dozens of social media users to film themselves placing fake bets on copies of the Polymarket website — ads showing wins that were never wagered on a product most American viewers could not legally use. Whether the contracts are gambling or financial instruments is still being decided. The marketing has not waited for the answer.