Key highlights:
- Polymarket filed a federal lawsuit against New York officials hours after the state sued the company
- New York claims Polymarket operates without a license and allows underage users to bet
- The state is seeking triple Polymarket’s gains, plus $100,000 per wagering violation
Polymarket has filed a counterlawsuit against New York state officials, striking back hours after the state accused the company of running an illegal gambling operation. The lawsuits were both filed on Thursday, joining the legal battles regarding prediction markets.
New York says Polymarket is running illegal gambling
The state argues that the platform’s prediction contracts, including wagers linked to sports outcomes, are essentially gambling with another name. The state also added that the prediction market platform has been operating without a license and avoiding local tax requirements.
Furthermore, New York officials said that the platform currently allows users between the ages of 18 and 20 to take bets, violating the New York law that sets a minimum age of 21 for mobile sports betting.
“By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.” Attorney General Letitia James said. “Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs.”
Governor Hochul also shared her concerns on the platform, zeroing in on the younger users.
“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 is seeking major financial penalties from the lawsuit. The state wants the company to pay 3x the gains it made in New York and also pay a $100,000 fine for every individual attempt or offer in sports wagering in the state.
New York is also demanding that Polymarket hand over a full account of all trades placed on its platform, along with details on how much money users lost and how much the company earned.
Just last week, South Korea sued some users of the app in the country, also calling it an illegal gambling business.
Polymarket fires back, citing federal oversight
Polymarket responded almost immediately to the claims. Later that Thursday, the company filed its federal lawsuit, saying that New York does not have the authority to regulate its platform in the first place, CNBC reported.
Event contracts are legally classified as swaps, a type of financial product that falls under federal, not state, oversight, Polymarket noted. The company said the CFTC holds exclusive authority over these federally regulated markets, and that New York’s attempt to apply its own gambling laws amounts to what they called an “extraordinary assertion of state power.”
“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.”
Neal Kumar, Polymarket’s chief legal officer, said they tried to work out the disagreements with the state officials but “they preferred the media hit,” adding that they “will fight for users.”
Prediction markets battle continues
The new clash follows previous legal run-ins. Before now, New York had filed a lawsuit against Kalshi, also accusing it of operating unlicensed gambling.
The CFTC has taken the side of the prediction markets in this fight. In August, the agency declared a “market emergency” in New York, stopping the state from enforcing its gambling laws on Kalshi. The CFTC has also filed lawsuits against many states, saying that it holds the right to regulate these platforms nationwide.
Polymarket U.S. launched in December 2025 and operates under CFTC oversight. The company also runs an offshore prediction platform that has been active since 2020.
Source:: Polymarket Countersues New York Over Illegal Gambling Claims