New York Attorney General Letitia James sued Polymarket US on September 24, accusing the company of operating as an unlicensed gambling business and seeking a state court injunction to stop its operations in New York.
The case centers on a regulatory divide. Polymarket US, also known as QCX LLC, has been designated as a contract market by the CFTC since July 9, 2025. However, New York argues that federal registration does not exempt the platform from state gambling laws.
Allegations and Legal Claims
The New York Attorney General's office alleges that Polymarket violated the state's constitutional gambling restrictions, three penal-law provisions, the state's sports wagering law, and the federal Wire Act. The core claim is that Polymarket promoted betting in New York without obtaining permission from the New York State Gaming Commission.
The petition cites Polymarket's marketing efforts, including an August 2025 post inviting users to "trade every football game in all 50 states." It also references contracts involving the Super Bowl, the Mets, and college football. According to the filing, Polymarket has a valuation exceeding $20 billion with annual US revenues above $1 billion.
Market Activity and Timing
The legal action arrives as prediction markets expand significantly. Over the past seven days, the sector recorded $406.27 million in total value locked and $4.756 billion in trading volume. Polymarket accounted for $349.51 million in TVL and $1.178 billion in weekly volume, while competitor Kalshi reported $3.371 billion in weekly volume.
Sports contracts represent a substantial portion of Polymarket's business, accounting for approximately 46.6 percent of its $3.47 billion weekly volume, compared to 23.2 percent for Kalshi.
A Longstanding Jurisdictional Dispute
The New York suit escalates an existing regulatory conflict. The CFTC filed its own lawsuit against New York in April, claiming federal authority over event contracts offered on registered exchanges. James' petition counters that event contracts should be classified as gambling subject to state jurisdiction.
This uncertainty creates practical consequences for the industry. Fragmented regulation increases compliance costs and divides liquidity across different jurisdictions, potentially slowing market development.
Global Regulatory Challenges
The classification question extends beyond the United States. The European Securities and Markets Authority stated in July that event contracts may qualify as financial instruments depending on their underlying structure, potentially triggering restrictions on retail binary options or falling under national gambling laws.
In Asia, major markets largely treat prediction markets through gambling regulation rather than financial-market rules, according to available industry analysis. Crypto-based prediction markets present additional complexity, as public-ledger settlement can make manipulation and wash trading more traceable than on traditional systems.
