New York Sues Polymarket for Unlicensed Gambling — Polymarket Files Immediate Counter-Suit
New York Attorney General Letitia James and Governor Kathy Hochul filed a lawsuit against Polymarket US on September 24 alleging the platform operates an unlicensed gambling operation and allows users aged 18-20 to participate, violating New York's 21+ requirement for mobile sports betting. Polymarket immediately filed a counter-suit in Manhattan federal court seeking to block enforcement on CFTC preemption grounds. The New York action mirrors the July 31 Kalshi lawsuit, under which New York is seeking over $36 billion. New York is now simultaneously pursuing both major CFTC-registered prediction market operators.
New York Attorney General Letitia James and Governor Kathy Hochul announced a lawsuit against Polymarket US on September 24, 2026, alleging that the prediction market platform operates an unlicensed gambling operation in violation of New York state law and allows users between the ages of 18 and 20 to participate in its markets, in violation of New York's 21-year minimum age requirement for mobile sports betting. The same day, Polymarket filed a counter-suit in Manhattan federal court against James and other state gaming officials, seeking declaratory judgment that New York's gambling laws are preempted by the Commodity Exchange Act and requesting a preliminary injunction blocking enforcement. The dueling lawsuit structure mirrors Kalshi's response to New York's July 31 complaint: Kalshi also filed a counter-suit in federal court on the CFTC preemption argument, and that case is currently on appeal to the Second Circuit after Judge Analisa Torres denied Kalshi's preliminary injunction on July 7.
The Polymarket lawsuit uses the same two-theory structure as the Kalshi complaint. New York's primary argument is unlicensed gambling: that Polymarket's event contracts — specifically sports event contracts — meet New York's definition of gambling (placing consideration on an uncertain outcome outside the participant's control), and that Polymarket lacks a New York State Gaming Commission license to operate such contracts. New York's second argument is the age-21 allegation: New York's licensed sports betting framework requires all participants to be at least 21 years old, while Polymarket's platform allows users 18 and older to trade. The same 18-20 exposure that appeared in the Kalshi complaint is now alleged against Polymarket — suggesting New York's investigation found that both platforms were serving users in the 18-20 age band who would be ineligible for licensed sportsbook access. Kalshi's July 31 lawsuit also sought at least $36 billion in damages, penalties, and related relief; the scale of damages requested against Polymarket was not disclosed in initial filings.
New York's simultaneous pursuit of both Kalshi and Polymarket marks a significant escalation. Previous state AG enforcement actions targeted specific platforms — Massachusetts sued Kalshi only; Nevada's Gaming Control Board targeted Kalshi only; the July 31 New York complaint was against Kalshi only. Now New York has extended its legal campaign to cover both of the dominant CFTC-registered prediction market platforms in a single jurisdiction, and has done so using the same legal theory and within two months of filing against Kalshi. The pattern suggests that New York's office has structured its enforcement strategy to target the entire licensed prediction market sector rather than to resolve its dispute with any individual platform. From Polymarket's perspective, entering active litigation in New York — the largest US legal sports betting market — while Kalshi's New York case is already in the Second Circuit creates a significant resource and compliance burden at the same time Missouri's 30-day compliance window is approaching (October 18).
The interaction between the New York Polymarket lawsuit and the Sixth Circuit's September 25 ruling against Kalshi in Ohio and Tennessee creates a difficult legal week for the prediction market sector. Kalshi lost the Sixth Circuit on Friday; New York sued Polymarket on Wednesday (and Polymarket filed the same day); the SCOTUS long conference sits on Monday September 28. The platforms are simultaneously defending or pursuing active litigation in more than ten states and three circuits, awaiting a SCOTUS cert decision that may not come until November or December, and facing a Missouri compliance deadline on October 18. The question of whether any platform can sustain this level of simultaneous multi-state litigation without operational concessions — in the form of geofencing, age restrictions, or voluntary exits from specific markets — is becoming more pressing each week. Polymarket's path forward in New York is identical to Kalshi's: deny that New York's gambling laws apply, invoke CFTC preemption, seek a preliminary injunction in federal court, and appeal if denied.
Operators mentioned in this article
Recent updates
Utah Files Felony Charges Against Kalshi and Its Founders — Second State to Criminally Charge a Platform
Utah filed criminal charges against Kalshi and its two co-founders, Tarek Mansour and Luana Lopes Lara, on October 28 — 13 felonies and a misdemeanor, including a second-degree 'pattern of unlawful criminal activity' count and 12 counts of online gambling promotion. The charges stem from a September sting in which an undercover agent placed 12 sports wagers verified to be in Utah. The CFTC sued Utah the day before to block state enforcement, its tenth such suit. Utah is the second state after Arizona to criminally charge Kalshi, and the first to charge the founders personally. Kalshi called it a 'crazy overreach.'
NBA Names Kalshi and Polymarket Preferred Exchanges — Leaving the NFL Alone in Opposition
The NBA announced on October 26 that it has named Kalshi and Polymarket its 'preferred prediction market exchanges,' signed a non-binding memorandum of understanding with the CFTC on basketball integrity, and expanded its DraftKings deal to include prediction markets — the first league to extend a sportsbook partnership into the category. The exchange deals bar league and team personnel from trading NBA contracts, limit permissible markets, and require sharing of suspicious-trading data, in exchange for NBA intellectual property and official data. The NBA joins MLB, the NHL, and MLS as partnered leagues, leaving the NFL as the lone major holdout — and the only league fighting the platforms in court.
CFTC Chair Says Agency Is Watching Prediction Markets for Manipulation Ahead of Midterms
CFTC Chairman Michael Selig said on October 23 that the agency is closely monitoring prediction markets for manipulation ahead of the November 3 midterms, and that it is separately scrutinizing oil market trading tied to President Trump's announcements about the war in Iran. Combined midterm open interest on Kalshi and Polymarket stood at $250 million as of October 18, with Kalshi holding 84%. Selig acknowledged the agency often catches political figures attempting to trade 'oftentimes after the fact.' The remarks highlight the CFTC's dual and somewhat conflicting role as both the platforms' federal protector and their manipulation watchdog, at a time when the agency has shed enforcement staff.