Regulatory Fury: New York Declares Polymarket an Illegal Gambling Ring
New York Attorney General Letitia James and Governor Kathy Hochul have filed a lawsuit against Polymarket, accusing the crypto-based prediction market of operating an unlicensed gambling business in the state. The lawsuit alleges Polymarket evaded taxes and targeted underage users, while Polymarket contends its platforms offer federally regulated event contracts under CFTC jurisdiction.
The State of New York, through Attorney General Letitia James and Governor Kathy Hochul, has initiated legal proceedings against Polymarket, a crypto-based prediction market platform. The lawsuit, filed on Thursday, accuses Polymarket of operating an unlicensed gambling operation within the state of New York. An investigation conducted by the Attorney General’s office concluded that the markets offered by Polymarket align with New York’s legal definition of gambling, primarily because users stake money on uncertain outcomes over which they have no control. The complaint further alleges that Polymarket failed to obtain a necessary license from the New York State Gaming Commission, thereby evading the taxes that are typically paid by licensed casinos and mobile sportsbooks. These tax revenues are critical, as they contribute to the funding of public schools, youth sports programs, and problem gambling treatment initiatives across the state.
This legal challenge against Polymarket emerges within a broader and evolving regulatory landscape for crypto-powered prediction markets, where federal agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are actively seeking to establish regulatory frameworks. Polymarket, alongside its competitor Kalshi, maintains that their platforms do not function as gambling sites but rather as federally regulated exchanges offering “event contracts,” which they classify as a type of derivative. Consequently, they argue that their operations should fall under the exclusive jurisdiction of the Commodity Futures Trading Commission, rather than state gaming laws. Notably, the CFTC supports this perspective and, in 2026, took legal action against nine states, asserting its exclusive nationwide authority over this particular industry.
Adding to the allegations, the New York complaint also highlights that Polymarket’s platform is accessible to users aged 18 to 20. This is a significant point of contention, as New York law mandates that mobile sports bettors must be at least 21 years old. Attorney General James stated that by