New York sues Polymarket over alleged illegal gambling and underage betting

Allegations filed in Manhattan court

New York Attorney General Letitia James and Governor Kathy Hochul filed a lawsuit on Thursday against Polymarket, accusing the platform of operating an unlicensed gambling business under state law. The petition, submitted to a state court in Manhattan, asks a judge to shut down the company's New York operations, impose civil financial penalties, seize profits, and order full restitution for affected users. State officials maintain that Polymarket sidesteps required gaming licenses from the New York State Gaming Commission and avoids state gambling taxes allocated to public schools and addiction treatment. The petition also alleges that the platform actively admitted users aged 18 to 20, violating New York's statutory minimum age of 21 for mobile sports betting.

By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming.

Legal jurisdictional conflict with federal regulators

The action creates direct friction with federal authorities under the Trump administration. The Commodity Futures Trading Commission claims exclusive regulatory authority over prediction markets, categorizing their offerings as event contracts and financial swaps rather than conventional betting. In August 2026, the federal agency declared a market emergency in New York in a bid to block state-level intervention against rival platform Kalshi. Donald Trump Jr. serves as a paid advisor to both Kalshi and Polymarket, and the CFTC has requested that the US Supreme Court step in to resolve the regulatory boundary.

Federal appeals courts remain divided on the jurisdictional boundary between state gambling rules and federal commodities oversight. The 3rd US Circuit Court of Appeals ruled in favor of the CFTC against New Jersey, whereas the 9th Circuit Court of Appeals backed Nevada in August 2026 by permitting the state to regulate Kalshi.

Expansion into sports and prior market scrutiny

The lawsuit notes that Polymarket, valued at more than $20 billion, began actively promoting sports wagers in July 2025, including an August 17, 2025 post on X describing its US mobile app as bad news for traditional sportsbooks. Event contract platforms have faced scrutiny over manipulation and wagering on sensitive public affairs. Previous episodes include wagers placed prior to US and Israeli military strikes on Iran, a White House teleprompter operator betting on presidential speech vocabulary, and an earnings presentation where a Coinbase executive mentioned specific phrases linked to $84,000 in bets across Kalshi and Polymarket.

Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs.

Enforcement sequence and corporate defense

The legal action against Polymarket follows a broader regulatory sweep across New York. Attorney General James filed petitions against Coinbase Financial Markets and Gemini Titan in April 2026, followed by a lawsuit against Kalshi in July 2026. Other states, including Nevada, Minnesota, and Kentucky, have pursued parallel actions against prediction platforms over unlicensed sports wagering. Polymarket rejected the state's claims, arguing that its peer-to-peer exchange structure functions through user-driven trading fees rather than house wagers.

Polymarket was founded in a tiny NYC apartment and now has more than 350 employees here, embodying why people and businesses come here to make it. We believe in New York and we're staying here.