State officials claim the prediction market platform poses risks to consumers, especially underage users
Category: Politics
On September 24, 2026, New York state officials filed a lawsuit against Polymarket, alleging that the prediction market platform operates an illegal gambling business. This legal action follows previous lawsuits against other prediction market platforms, including Kalshi, Coinbase, and Gemini, earlier in the year.
Governor Kathy Hochul announced the lawsuit, emphasizing the risks posed by Polymarket’s operations, particularly to users under the legal gambling age of 21. "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," Hochul stated.
The lawsuit claims that Polymarket has been operating without the necessary licenses from New York’s gaming commission and has not paid the associated taxes that licensed gambling operations are required to pay. Attorney General Letitia James highlighted the importance of enforcing gambling laws to protect consumers. "Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and to assure funding for educational and public benefit programs. By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of the support they need," she said.
The state’s lawsuit seeks to stop Polymarket from its alleged illegal operations, require the company to forfeit all illegal gains, provide restitution to affected consumers, and pay fines equal to three times its illegal gains.
In response, Polymarket’s chief legal officer, Neal Kumar, expressed disappointment over the lawsuit, asserting that the company intends to fight the allegations. "We believe in New York and we’re staying here. The AG’s decision to copy/paste a recycled lawsuit is disappointing. We’ll fight for our users," Kumar stated. He added that Polymarket had sought to engage directly with state officials to address concerns rather than resorting to litigation.
This legal dispute is part of a broader debate over how prediction market platforms should be regulated. These platforms allow users to place bets on the outcomes of various events, including sports, finances, and political elections. The contention arises from whether such platforms should be governed by state gambling laws or federal regulations enforced by the Commodity Futures Trading Commission (CFTC).
Historically, the CFTC has taken a stance favoring the regulation of prediction markets at the federal level. Under the Trump administration, the CFTC sided with these platforms, asserting its regulatory authority over them. This has led to a patchwork of legal interpretations across different states, complicating the regulatory environment for companies like Polymarket.
Earlier this month, New Jersey sought intervention from the Supreme Court to clarify the legal status of prediction markets, following contradictory rulings from appellate courts. The 3rd Circuit Court of Appeals had previously blocked New Jersey from enforcing its gambling laws against Kalshi, whereas the 9th Circuit Court of Appeals ruled that Nevada could regulate prediction markets similarly to traditional gambling and sportsbooks.
The outcome of the lawsuit against Polymarket could have consequences for the future of prediction markets in New York and potentially across the United States. If the court rules in favor of the state, it may set a precedent that reinforces state control over such platforms, which could lead to stricter regulations and licensing requirements.
Conversely, a ruling in favor of Polymarket could bolster the argument that prediction markets should be regulated federally, potentially allowing them to operate more freely without the constraints of state gambling laws. As these legal battles continue, the conversation around consumer protection, especially for vulnerable populations, will remain at the forefront.
As the situation develops, both state officials and Polymarket are preparing for a protracted legal battle. The next steps include court proceedings where both sides will present their arguments. A decision from the court could come as early as late 2026, making this a closely watched case in the realms of law and consumer protection.