The state of New York went to court on Thursday with a simple claim: Polymarket, the prediction market that calls itself the world’s largest, is a bookmaker that has not bothered to buy a bookmaker’s licence. Attorney General Letitia James filed suit in a state court in Manhattan, asking a judge to shut down what the state calls an “illegal gambling operation” and to make the company pay fines, hand over its gains and repay its customers.
Governor Kathy Hochul put the case in plain words. “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,” she said. New York law sets 21 as the minimum age for mobile sports betting. Polymarket, the state says, lets users of 18 to 20 trade on its site, which the complaint describes as exposing young people to gambling’s “damaging effects on their mental and financial well-being.”
Then there is the money. Licensed casinos and sports betting firms pay taxes into the state treasury, and that money, the state notes, goes to public schools, sports programs for underserved youth, and treatment for gambling addiction. Polymarket, the complaint says, is “sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do.” The company is reportedly valued at more than $20 billion.
A bet by another name
Polymarket does not call what it sells gambling. Its wagers are dressed in financial language as “event contracts” or “swaps.” You do not bet that a team will win; you buy a contract that pays out if it does. State governments and some courts have looked at this arrangement and seen a bet with the name filed off.
James’s lawsuit reaches for a concrete example. Among Polymarket’s recent offerings was a contract on whether the Los Angeles Dodgers would beat the New York Mets on July 24, 2026 by more than 1.5 runs. The Dodgers won 4-2. A wager on the margin of a baseball game is, on the ordinary meaning of words, a bet. James calls prediction markets “quintessentially gambling” because people stake money on outcomes they do not control and collect if they guess right. By running such a market outside state oversight, she said, Polymarket is “exposing New Yorkers to gambling addiction with few, if any, safeguards.”
Her office has made the same argument before. Two months ago, according to Al Jazeera, New York filed a similar suit against Kalshi, Polymarket’s chief rival, and earlier this year it sued Coinbase Financial Markets and Gemini Titan, accusing all of them of operating without the gaming licences required by the New York State Gaming Commission.
Washington against the states
Polymarket did not wait long to answer. Within hours on Thursday it filed its own suit against James in Manhattan federal court, arguing that the federal Commodity Futures Trading Commission, and the CFTC alone, has the power to regulate prediction markets. New York, the company said, had given it an “impossible choice” between obeying the state and losing its federal right to operate nationwide, or carrying on and facing what it called potentially “huge” criminal liability. “This is an extraordinary assertion of state power squarely foreclosed by federal law,” the company said. Its chief legal officer, Neal Kumar, added that Polymarket had tried to settle its differences with state officials but “they preferred the media hit.”
The company fights this battle with friends in high places. The Trump administration has taken the prediction markets’ side against the states. In August, the CFTC declared a “market emergency” in New York in an effort to stop the state applying its gambling laws to Kalshi — an emergency whose nature was that a state was enforcing its own laws. Polymarket itself was kept out of the American market for more than three years, then relaunched last December, three months after the CFTC gave it a green light. The firm has also drawn investment from 1789 Capital, a venture capital firm where Donald Trump Jr., the president’s oldest son, is a partner; he also advises Polymarket.
The industry’s rise owes much to the 2024 election, in which prediction markets did better than the pollsters at forecasting Donald Trump’s victory over Kamala Harris. Since then their popularity has soared, and so has the quarrel over who polices them. Federal appeals courts, according to Reuters, are divided on the question, which suggests the US Supreme Court may have to settle it.
New York’s suit asks for civil fines, the forfeiture of illegal gains and full restitution to customers. Polymarket’s asks a judge to declare that New York’s civil and criminal gambling laws cannot touch it. James framed her case as one about who the law is for. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support,” she said. Two courts in Manhattan will now decide, in the first instance, whether a contract on a baseball score is finance or a flutter. The ordinary citizen, who pays the taxes Polymarket does not, may feel he knows the answer already.