New York Attorney General Letitia James has sued prediction market platform Polymarket, alleging that it operates as an illegal gambling operation. The lawsuit represents the state's latest enforcement action against prediction market platforms.
This follows New York's prior lawsuit against Kalshi in July on similar grounds, as well as earlier actions against Coinbase and Gemini over their prediction market offerings. Multiple states have pursued legal action against prediction market platforms, arguing they operate as unlicensed sports betting services.
Regulatory Conflict
A fundamental dispute has emerged over regulatory jurisdiction. States contend that prediction market platforms offering sports-related contracts should be regulated under gambling laws. In response, the CFTC has sued states to defend its exclusive jurisdiction over these platforms, arguing that sports prediction contracts are swaps under federal regulation.
Conflicting Court Rulings
Federal courts have issued conflicting decisions on the matter. The 9th Circuit Court of Appeals sided with Nevada, determining that sports contracts offered by prediction markets constitute sports bets. By contrast, the 3rd Circuit Court of Appeals ruled in favor of the CFTC, finding it has exclusive jurisdiction over sports prediction markets.
Two certiorari petitions are currently pending before the Supreme Court, seeking clarification on whether states retain the authority to regulate sports prediction markets. The outcome of these cases could determine the regulatory framework for the industry going forward.
