On September 24, 2026, New York Attorney General Letitia James and Governor Kathy Hochul announced a lawsuit against QCX LLC, the operator of Polymarket US. The State of New York alleges that the prediction market platform is operating unlicensed gambling activities within the state.
The lawsuit asks the court to stop Polymarket from continuing operations without a gambling license, disgorge alleged illegal revenues, provide restitution to customers, and impose civil penalties equal to triple those revenues.
New York claims Polymarket operates gambling activities
Polymarket returned to the US market in December 2025, starting with markets allowing users to wager on the outcomes of sporting events. The platform then planned to expand into various other types of events.
According to the New York Attorney General’s Office, these contracts meet the state law definition of gambling because participants stake money on outcomes outside their control. The state argues that Polymarket has not been licensed by the New York State Gaming Commission, yet still offers products that are fundamentally equivalent to sports betting.
The lawsuit also cites age restrictions. New York law requires users to be at least 21 years old to participate in mobile sports wagering, while Polymarket is accused of allowing users aged 18 to 20 to participate in its markets.
Polymarket faces penalties and restitution demands
New York seeks to compel Polymarket to disgorge revenues the state claims were gained from illegal operations. The lawsuit also seeks restitution for affected customers and civil penalties equivalent to three times the illegal revenues.
The New York Attorney General’s Office contends that operating without a license allows Polymarket to evade obligations imposed on licensed sportsbooks and betting platforms, including tax obligations. According to the state, regulated gambling revenues typically fund schools, youth sports programs, and problem gambling treatment.
At the time of CoinDesk’s reporting, a representative for Polymarket had not responded to a request for comment on the lawsuit.
The dispute centers on prediction market classification
The lawsuit extends beyond Polymarket alone. The broader issue is whether prediction markets in the US should be considered financial products or gambling activities.
Industry companies argue that event contracts are financial products falling under the regulatory jurisdiction of the US Commodity Futures Trading Commission (CFTC). Under this argument, platforms operate within a federal framework rather than having to obtain gambling licenses in each state.
Conversely, New York and several state-level regulators view sports-related contracts as a form of wagering. If this view is upheld by the courts, prediction market platforms could be forced to comply with local gambling laws and licensing requirements.
New York continues tightening oversight on prediction markets
Polymarket is the latest platform brought to court by New York. In July 2026, the state sued Kalshi over allegations of operating an illegal gambling platform. Prior to that, New York also took legal action against Coinbase and Gemini over allegations concerning unlicensed gambling platforms.
The lawsuits show that New York is applying existing gambling laws to rein in new prediction products. Meanwhile, disputes between prediction market platforms and state regulators are increasingly reaching appellate levels, with the Kalshi and New Jersey case having been appealed to the US Supreme Court.
The outcome of the Polymarket lawsuit will directly impact the platform’s ability to operate in New York. More broadly, the case could help delineate the boundary between prediction markets and sports betting in the US, especially as crypto platforms increasingly seek to bring event contracts to mainstream users.