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.
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Recent updates
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