New York calls Polymarket illegal gambling. Polymarket says that’s Washington’s call, not Albany’s
New York’s attorney general sued Polymarket as an unlicensed gambling operation. Hours later Polymarket countersued, arguing its event contracts are federally regulated swaps that a state cannot touch. The label, market or bet, is now a legal question.
Published · 2 min read
On September 24, New York’s attorney general, Letitia James, sued Polymarket, alleging the prediction-market company runs an unlicensed illegal gambling operation without the New York State Gaming Commission license the state requires. Hours later, Polymarket countersued James and state officials in Manhattan federal court, according to Reuters.
The dueling lawsuits turn a long-running philosophical argument, is a prediction market a market or a bet, into a concrete fight over who gets to regulate it.
What New York says
James’s suit calls Polymarket’s contracts quintessentially gambling, citing examples such as betting whether the Los Angeles Dodgers would beat the New York Mets by more than 1.5 runs, and objects to Polymarket letting 18 to 20-year-olds use the platform when New York sets 21 as the minimum for mobile sports betting. The state seeks civil fines, forfeiture of gains at three times the amount, $100,000 for each sports-wagering offer, restitution, and a full account of trades.
“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.”
What Polymarket says
Polymarket’s countersuit argues that states cannot regulate swaps, because it views its event contracts as federally regulated derivatives. On that theory, New York’s enforcement is preempted by federal law, and the company frames the state’s action as an overreach.
“This action seeks to prevent imminent and irreparable harm arising from New York’s enforcement of state gambling laws against federally regulated derivatives exchanges, enforcement Congress has expressly prohibited.”
Why it matters beyond Polymarket
This is not a one-off. New York sued Polymarket’s rival Kalshi on similar grounds two months earlier, and has targeted others. The outcome will decide whether prediction markets, the same ones we flagged as useful tools rather than crystal balls when their CLARITY Act odds collapsed, operate as federally regulated exchanges or state-licensed gambling.
Our take
This is a jurisdiction fight as much as a morality one: state gambling law against federal derivatives law, with billions and a fast-growing industry in between. For users, the practical point is unglamorous. A platform’s legal status where you live is not settled, and it’s a market, not a bet is now something a court, not a marketing page, will decide. This is news, not legal or investment advice.