New York Sues Polymarket for Illegal Gambling Operation After Kalshi

New York Attorney General Letitia James has sued Polymarket, accusing its U.S. business of running an illegal gambling platform in the state. Filed on September 24, the lawsuit adds to New York’s growing fight against prediction markets.

The move comes after similar action taken against Polymarket’s rival Kalshi.

New York Sues Polymarket: What It Demands

The New York Attorney General’s office is seeking strong legal action against Polymarket and wants to restrict its operations in the state.

The lawsuit asks the court to permanently block and shut down Polymarket US from operating as an unlicensed gambling platform in New York. It also asks Polymarket to give up all alleged illegal profits, repay affected users, and pay fines equal to three times its total profits.

Attorney General Letitia James said, 

“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling. 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.”

Polymarket and other prediction platforms, however, argue that they are not gambling businesses. 

They say their contracts are financial products and that their platforms operate as federally regulated derivatives exchanges under the Commodity Futures Trading Commission (CFTC).

New York Calls Polymarket Gambling

New York argues that Polymarket’s contracts work like gambling because users can put money on the outcome of elections, sports, entertainment, and other events. The state also claims that the platform allows people under 21 to take part and avoids the taxes and other rules faced by licensed gambling operators.

The lawsuit comes as prediction markets have grown rapidly, with Polymarket seeing a sharp rise in both users and trading activity around major events. 

In June 2026, Polymarket disclosed that its annualized revenue had surged past $1 billion.

The platform’s growth is also reflected in its trading volume, which has crossed $130 billion in 2026. Some months have seen especially strong activity, with March alone recording $10.57 billion in trading volume.

Polymarket Faces a Wider State-Level Sweep

Polymarket is not the only prediction market facing action from New York. The filing comes in July after Attorney General Letitia James launched a similar lawsuit against Kalshi seeking $36 billion in damages. 

New York has also taken legal action against prediction market businesses linked to Coinbase Financial Markets and Gemini Titan.

The state’s concerns also involve the tax rules that apply to licensed gambling operators. New York has one of the highest sports betting tax rates in the U.S., with licensed operators paying 51% of gross gaming revenue to the state. 

New York argues that prediction platforms can avoid these taxes and other rules by operating outside the state’s gambling system.