New York Sues Polymarket for Illegal Gambling, Two Months After Suing Rival Kalshi

New York Attorney General Letitia James sued Kalshi in July over the same core allegation: running gambling without a license. On Thursday, she filed an almost identical case against Polymarket, the crypto-based prediction market that lets users bet on everything from NFL games to reality TV finales to elections.

The lawsuit targets QCX LLC, the entity that operates Polymarket's U.S. platform. James is asking a court to block the company from operating in New York without a state gambling license, and she wants fines, restitution for users, and forfeiture of what her office calls illegally generated gains.

What The Filing Says

James' complaint leans on Polymarket's own marketing. Ahead of its U.S. relaunch on December 3, 2025, the company advertised that users could "TRADE EVERY FOOTBALL GAME IN ALL 50 STATES" and later claimed its platform was "legal in all 50 states," according to the filing cited by Bitcoin News. New York's position is that this isn't trading, it's betting, and the company knew it.

The complaint also flags age. New York requires users to be at least 21 for mobile sports betting, but the state alleges Polymarket let users as young as 18 participate, according to Crypto Briefing. "Each contract is a bet," the filing states. "Respondent accepts wagers from members of the public as a gambling business in New York in flagrant disregard of New York's State Constitution, penal laws, and other statutes."

Governor Kathy Hochul joined James in announcing the suit. "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," Hochul said in a statement carried by bronx.news12. "Nobody is above the law in our state."

Polymarket Fires Back

Polymarket's chief legal counsel, Neal Kumar, didn't hold back. "Polymarket was founded in a tiny NYC apartment and now has more than 350 employees here," he said, according to Futurism. "While the AG's decision to copy/paste a recycled lawsuit is disappointing, we'll fight for our users. We didn't run to preemptively sue the state, we chose to engage with them directly on the substance and address their concerns. They preferred the media hit."

Polymarket says it tried to negotiate before James went to court. James' office hasn't publicly disputed that characterization, but her lawsuit makes clear she views the company's underlying conduct, not the negotiating posture, as the violation.

The Bigger Jurisdictional Fight

This is now James' fourth swing at the prediction-market industry. She sued Kalshi in July and hit Coinbase Financial Markets and Gemini Titan with similar petitions in April, according to The Standard.

Every one of these cases turns on the same unresolved question: are event contracts financial derivatives regulated exclusively by the Commodity Futures Trading Commission, or are they gambling products subject to state licensing and age laws? CFTC Chair Michael Selig has argued the agency has "exclusive jurisdiction," putting Washington squarely at odds with state attorneys general, per TradingView.

Federal appeals courts haven't settled it either. In August, an appeals court ruled Kalshi could not block Nevada regulators from overseeing its markets. Earlier this month, New Jersey asked the U.S. Supreme Court to take up its own case against Kalshi specifically to resolve who's in charge. The Court hasn't said whether it will hear it.

The industry's strongest argument is straightforward: a patchwork of 50 different state gambling regimes would make it nearly impossible to run a single national product, and Congress already built a federal framework for derivatives trading through the CFTC. Kalshi and Polymarket have leaned on that argument in every one of these lawsuits.

States counter that consumer protection, problem-gambling safeguards, and licensing revenue are core state functions that federal futures law was never designed to override, and that companies shouldn't get to dodge gambling taxes by relabeling a bet as a "contract."

The Trump Family Wrinkle

The Trump family has financial ties to both companies now facing New York lawsuits. Donald Trump Jr.'s investment firm, 1789 Capital, put $300 million into Polymarket as part of a round that valued the company at $21 billion, according to The Standard. No investigation into that relationship or allegation of wrongdoing tied to it has been announced by any regulator. The CFTC under the Trump administration has simultaneously pushed to keep prediction markets under exclusive federal, not state, control.

Separately, the CFTC is investigating Polymarket after fraudsters reportedly tried to steal at least $10 million from the platform, according to Futurism. That probe is unrelated to New York's gambling claims but adds to the regulatory pressure the company is facing on multiple fronts.

No trial date has been set in James' case. Whether the Supreme Court agrees to hear New Jersey's petition on Kalshi could ultimately determine whether James' Polymarket lawsuit, and every other state case like it, has any legal force at all.