New York Sues Polymarket Over Unlicensed Gambling — Polymarket Countersues
New York Governor Kathy Hochul and Attorney General Letitia James announced a lawsuit on September 24 against QCX LLC, which operates Polymarket US, alleging the prediction-market platform has been running an unlicensed gambling business in the state. Polymarket responded the same week by filing its own suit in the U.S. District Court for the Southern District of New York, seeking a declaratory judgment that its sports and event contracts are federally regulated derivatives, not state-regulated gambling.
What New York's lawsuit alleges
The state's complaint argues Polymarket offered New Yorkers betting on sporting events and other uncertain outcomes without a license from the New York State Gaming Commission, and that the platform evaded state tax obligations tied to gambling revenue. It also alleges Polymarket allowed users between 18 and 20 years old to participate, below New York's legal gambling age of 21. The state is seeking a court order halting Polymarket's unlicensed operations in New York, forfeiture of what it calls illegal gains, restitution for affected users, and fines equal to three times those gains. Attorney General James said the state's gambling laws "exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs."
Polymarket's countersuit
Polymarket's countersuit takes the same position the company has argued in other states: that its contracts are traded on a platform regulated by the Commodity Futures Trading Commission under the federal Commodity Exchange Act, which it argues preempts New York's state gambling statutes. The company says it does not act as a counterparty to any trade and charges a flat transaction fee regardless of outcome, distinguishing its model from a traditional sportsbook. In a statement, Polymarket said the state's enforcement action risked "imminent and irreparable harm" to a federally regulated exchange. Governor Hochul countered that "by running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk."
Why it matters to US bettors
This is now one of several active state-versus-platform fights testing whether prediction markets that let users bet on sports outcomes fall under federal commodities law or state gambling law — a jurisdictional question that remains unsettled nationally and is already the subject of a separate petition New Jersey has filed with the U.S. Supreme Court. For bettors, the practical stakes are access: if New York's position prevails in court, platforms like Polymarket could be forced to geofence the state entirely, similar to restrictions already imposed in other states following court orders. Until the litigation is resolved, New York residents should expect continued uncertainty over whether sports-related prediction contracts remain available to them.