New York Attorney General sues Polymarket for operating unlicensed gambling business

New York Attorney General Letitia James has sued Polymarket US, alleging the platform operates an unlicensed gambling business. The state seeks a permanent injunction, customer restitution, and triple damages. While Polymarket operates under federal CFTC registration, New York argues state gambling laws still apply. The lawsuit escalates a broader jurisdictional clash over prediction markets, which are experiencing massive volume growth, particularly in sports contracts.

New York lawsuit against Polymarket

• ▪New York Attorney General Letitia James filed a lawsuit against QCX LLC, which operates as Polymarket US, in a New York state court on September 24, 2026
• ▪The New York Attorney General alleges Polymarket US operates an unlicensed gambling business, seeking a permanent injunction to stop Polymarket US from offering unlicensed event contracts tied to sports, elections, culture, and other events in New York

Alleged violations of wagering laws

• ▪The New York Attorney General alleges that Polymarket US allows users aged 18 and above to wager, violating New York's requirement that mobile sports bettors must be at least 21
• ▪The New York Attorney General alleges that Polymarket US violated New York's constitutional gambling restrictions, three penal-law provisions, state sports wagering laws, and the federal Wire Act

Financial penalties sought by New York

• ▪The New York Attorney General's petition against Polymarket US seeks a separate penalty of $100,000 for each offering or attempt to offer unauthorized sports wagering or mobile sports wagering within or from New York
• ▪The New York Attorney General is seeking a penalty equal to three times the gains Polymarket US obtained through its alleged illegal unlicensed gambling activities, alongside full restitution for customers and disgorgement of profits

Previous state enforcement

• ▪New York Attorney General Letitia James secured a settlement worth up to $2 billion from Genesis in 2024, which was then the largest crypto settlement in New York state history
• ▪The New York Attorney General previously filed unlicensed gambling lawsuits similar to her September 24, 2026 lawsuit against Polymarket, seeking triple-gain penalties against Coinbase Financial Markets and Gemini Titan in April 2026, and against Kalshi in July 2026

Federal regulation of prediction markets

• ▪QCX LLC has been a Commodity Futures Trading Commission (CFTC)-designated contract market since July 2025, which Polymarket US treats as the federal basis for offering its prediction markets
• ▪A federal appeals court ruled in April 2026 that New Jersey could not regulate Kalshi's federally regulated prediction markets, while another federal appeals court ruled in August 2026 that federal law was unlikely to block Nevada from applying gambling rules to Kalshi's sports contracts
• ▪The Commodity Futures Trading Commission filed a lawsuit against New York in April 2026, claiming absolute federal control over event contracts offered on registered exchanges

Prediction market trading volumes

• ▪Sports contracts make up approximately 46.6% of Polymarket's $3.47 billion weekly volume, representing about $1.62 billion, compared to 23.2% of Kalshi's $15.27 billion weekly volume, according to Artemis data for the week ending September 20, 2026
• ▪Polymarket holds $349.51 million in total value locked (TVL) and recorded $1.178 billion in weekly volume, while Kalshi reported $3.371 billion in weekly volume, amid a booming prediction market

Debatable claims

• ▪Federal regulation shields Polymarket's sports markets from New York gambling laws
• ▪New York's demand for triple-gain penalties against Polymarket is disproportionate
• ▪Allowing 18-year-olds to trade on prediction markets poses unacceptable public risks
• ▪Event contracts on prediction markets constitute gambling