New York Sues Polymarket Over Illegal Gambling Claims
New York’s Attorney General Letitia James has sued Polymarket, accusing the prediction‑market company of operating an unlicensed gambling service that targets users as young as 18. The lawsuit follows similar actions against competitors Kalshi, Coinbase and Gemini and reflects ongoing tension betwe…
By Felo News Desk · Published
On Thursday, New York Attorney General Letitia James filed a 30‑page lawsuit against the prediction‑market platform Polymarket, alleging that the company offers contracts that effectively constitute sports betting and other wagering activities that violate state gambling laws. The filing claims that Polymarket has been advertising and promoting these contracts to New Yorkers since the launch of its mobile app in December 2025, and that the platform has encouraged gambling among users as young as 18, a group that state law protects by setting the minimum age for mobile sports betting at 21.
Background of the Legal Action
The lawsuit is part of a broader pattern of state‑level litigation against prediction‑market operators. Two months earlier, New York sued Kalshi, a competitor that offers event contracts on political and economic outcomes. In April, the state also sued Coinbase and Gemini for providing users the ability to bet on sports, entertainment and elections, claiming the companies were operating without licenses from the New York Gaming Commission. The current action against Polymarket mirrors these earlier cases, underscoring the state’s insistence that prediction markets are not exempt from the same regulatory framework that governs traditional gambling.
Allegations Against Polymarket
James’ office argues that Polymarket’s contracts are “quintessentially wagering” disguised as prediction markets. The suit cites a post on the social‑media platform X dated August 17, 2025, in which the company announced its U.S. mobile app launch and warned that the move would be “BAD NEWS (For sportsbooks).” The lawsuit also points to the company’s marketing practices, which the attorney general’s office claims target young people. Polymarket, valued at more than $20 billion, is accused of advertising sports‑betting contracts to users as young as 18, violating the state’s minimum age requirement of 21 for mobile sports betting.
The filing further alleges that Polymarket’s operations have put New Yorkers at risk, particularly underage users who are vulnerable to problem gambling. Governor Kathy Hochul echoed these concerns in a statement, saying the company’s unlicensed gambling activities deprive families of critical services and support.
Company Response and Broader Context
Polymarket’s chief legal officer, Neal Kumar, has declined to comment directly on the lawsuit but said the company is open to discussion with the attorney general’s office. In a statement, Kumar noted that the firm has engaged with regulators on the substance of the allegations and that it is prepared to address consumer protection and transparency concerns.
Polymarket’s ties to political figures add another layer to the controversy. The platform has received investment from 1789 Capital, a venture‑capital firm backed by Donald Trump Jr., who also sits on Polymarket’s advisory board. This connection has drawn additional scrutiny from lawmakers and the public.
Federal vs. State Authority
The lawsuit highlights a long‑standing debate over whether state regulators or the federal Commodity Futures Trading Commission (CFTC) has jurisdiction over prediction markets. The CFTC chair, Michael Selig, has asserted that the federal agency holds exclusive authority over these platforms. Meanwhile, states like New York, Arizona, Massachusetts and Nevada have pursued legal action against operators they view as unlicensed gambling services. In a related development, New Jersey officials have petitioned the U.S. Supreme Court to hear a case against Kalshi, seeking a definitive ruling on regulatory authority.
Unresolved Issues and Next Steps
The lawsuit is still in its early stages, and it remains unclear whether the court will grant the state’s request to block Polymarket from serving New Yorkers. The case could set a precedent for how other states approach regulation of prediction markets and may influence federal policy. Polymarket has not yet issued a formal response to the allegations, and the company’s future operations in New York will depend on the outcome of the litigation.
Meanwhile, the broader industry is watching closely. The lawsuit comes amid reports that users had linked stolen debit cards to Polymarket accounts, allowing them to place wagers and drain accounts. The incident, reported by the Wall Street Journal, prompted Polymarket’s CEO, Shayne Coplan, to respond that the company would continue to grow and pay fines if regulators discovered the issue. The incident has raised concerns about the platform’s security and compliance practices.
Implications for Users and the Market
For consumers, the lawsuit signals a potential shift in how prediction markets are regulated in the United States. If the court sides with New York, operators may be forced to obtain state licenses or face restrictions on offering certain types of contracts. The case also underscores the importance of age verification and responsible gambling measures, as state law seeks to protect younger users from predatory marketing practices.
For the prediction‑market industry, the lawsuit represents a warning that state regulators are prepared to take legal action against platforms that do not comply with local gambling statutes. The outcome could influence how companies structure their offerings and whether they pursue federal preemption claims.
Key facts
- New York Attorney General sues Polymarket for unlicensed sports betting contracts
- The lawsuit targets marketing to users as young as 18, violating state age limits
- Polymarket’s ties to 1789 Capital and Donald Trump Jr. add political scrutiny
- The case highlights the ongoing debate over state vs. federal jurisdiction in prediction markets
- Polymarket has not yet responded; outcome could set precedent for other states
Why it matters
The case illustrates the clash between state gambling laws and federal oversight of prediction markets, potentially reshaping how these platforms operate and protecting vulnerable users from predatory practices.
Frequently asked questions
What is a prediction market?
A prediction market is a platform where users can buy and sell contracts that pay out based on the outcome of future events, such as elections, sports games or award shows.
Why is New York suing Polymarket?
New York claims that Polymarket’s contracts effectively function as sports betting and other wagering activities that violate state gambling laws, including targeting users under the legal age.
Does the federal government have authority over these platforms?
The Commodity Futures Trading Commission has claimed exclusive jurisdiction over prediction markets, but states like New York are pursuing legal action, leading to an ongoing jurisdictional dispute.
Sources
- [1] aljazeera.com
- [2] cointelegraph.com
