New York has taken legal action against Polymarket, alleging that it runs an 'illegal gambling operation' through its prediction market. Governor Kathy Hochul stated that by operating unlicensed, Polymarket risks exposing vulnerable young users to problem gambling. The state claims that the platform is sidestepping its tax obligations, thereby depriving public schools and youth sports programs of much-needed funding.

According to New York Attorney General Letitia James, 'Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs.' She went on to say that by avoiding these laws, Polymarket targets the most vulnerable users.

The lawsuit, filed today in New York County court, seeks a court order to stop Polymarket from operating as an unlicensed gambling business, and demands that the company pays fines, forfeits all illegal gains, and pays restitution to users. New York previously took similar action against Kalshi, Polymarket’s chief rival, and the Trump administration’s Commodity Futures Trading Commission has declared a 'market emergency' in New York to protect prediction markets.

Polymarket and Kalshi offer bets in the form of 'event contracts' or 'swaps,' which are legally recognized as gambling. The dispute highlights the ongoing tension between innovation and regulation, as state governments seek to apply long-standing laws to new forms of gambling.