New York sues Polymarket over alleged unlicensed gambling operations
New York's Attorney General Letitia James and Governor Kathy Hochul have launched a lawsuit against Polymarket, seeking to halt its operations as an unlicensed gambling business within the state. This action represents part of a wider offensive by multiple US states attempting to regulate prediction markets as gambling operations, with New York now pursuing cases against four such platforms including Kalshi, Coinbase Financial Markets and Gemini Titan. The push matters because it reflects a fundamental disagreement over how these emerging financial platforms should be overseen.
The core dispute centres on regulatory jurisdiction and consumer protection. States argue that prediction markets facilitate illegal gambling and allow underage betting, particularly given that most platforms set an 18-year-old minimum whilst sports betting minimums in many states are 21. However, the federal Commodity Futures Trading Commission has counter-sued several states, asserting that it holds sole regulatory authority over prediction markets and that state actions exceed their legal remit. The courts remain split on the issue: the 3rd Circuit Court of Appeals sided with the CFTC against New Jersey, whilst the 9th Circuit favoured Nevada's regulatory efforts against Kalshi last month.
- New York sues Polymarket, claiming it's an unlicensed gambling operation targeting younger users
- Federal CFTC claims exclusive jurisdiction; opposes state regulatory efforts nationwide
- Courts remain divided on prediction market authority between states and federal agencies
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
States have a legitimate regulatory interest in protecting their residents from harmful gambling-like activities within their borders, particularly when these platforms allow 18-year-olds to participate whilst most state sports betting laws set the minimum at 21. Traditional principles of state police power recognise that states should oversee gaming and betting activities to safeguard consumers and prevent underage participation in speculative financial instruments that carry genuine risks of substantial loss. Prediction markets, whatever their technical classification, function as wagering platforms and warrant the same protective regulatory oversight that states extend to casinos and sports betting.
The case against
Prediction markets are properly classified as commodity futures contracts under the Commodity Exchange Act, placing them squarely within the federal CFTC's regulatory mandate rather than state gambling jurisdiction. A uniform federal framework provides clearer oversight, prevents regulatory arbitrage whereby platforms migrate to permissive states, and avoids the chaos of incompatible state regimes that would effectively prohibit the platforms from operating nationally. The CFTC possesses specialised expertise in derivatives regulation, whilst state-by-state governance based on gambling principles would misclassify these financial instruments and create an unworkable patchwork of conflicting mandates.
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Originally published by Engadget as “New York continues to fight prediction markets with a lawsuit against Polymarket”.