Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—N.Y. Sup.: New York and Polymarket sue each other over prediction markets trading, (Sep 25, 2026)
New York says Polymarket is offering illegal betting, while Polymarket says the CFTC’s exclusive federal jurisdiction preempts New York’s laws.
New York Attorney General Letitia James and Polymarket US have filed lawsuits against each other over prediction markets trading. New York alleges that Polymarket US is operating an illegal unlicensed gambling operation that harms the state. Polymarket US seeks to prevent New York from bringing enforcement against it, saying that New York’s enforcement actions against other prediction markets are an “extraordinary assertion of state power squarely foreclosed by federal law.”
New York’s complaint was filed in state court and seeks massive financial remedies including restitution to Polymarket customers, disgorgement of all illegal gains, a penalty of three times the amount of illegal gains, and a $100,000 penalty for each offering of sports wagering, (State of New York v. QCX LLC (d/b/a Polymarket US) N.Y. Sup. Sept. 24, 2026).
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming,” New York Governor Kathy Hochul said in a press release.
New York’s lawsuit follows similar actions against Kalshi and Coinbase and Gemini.
Polymarket filed its complaint in Manhattan federal court and seeks an injunction prohibiting New York from enforcing its laws to the extent Polymarket’s activities are governed exclusively by federal law. Polymarket also filed a notice of removal to move New York’s lawsuit to federal court, (QCX LLC d/b/a Polymarket US v. James, No. 1:26-cv-08345-UA (S.D.N.Y. Sept. 24, 2026)).
“The threat to Polymarket US is immediate and concrete… The harm resulting from state enforcement would be irreparable,” Polymarket’s complaint stated.
Polymarket noted that the CFTC is seeking an injunction against New York as part of a multi-state campaign to defend its alleged exclusive jurisdiction in this area.
New York lawsuit. New York contends that event contracts on the Polymarket US platform are actually illegal bets that Polymarket US is offering without obtaining a necessary license from the New York State Gaming Commission.
“Respondent accepts wagers from members of the public as a gambling business in New York in flagrant disregard of New York’s State Constitution, penal laws, and other statutes,” the complaint stated.
New York gave examples of Polymarket contracts that it considers bets, including whether the New York Knicks would defeat the San Antonio Spurs in the NBA finals, the “New York Governor Election Winner,” and which contestant would be eliminated in week four of the reality TV show “Big Brother Season 28.”
The state also said that Polymarket operates without consumer protection mechanisms that are a mandatory part of New York’s regulatory regime, including measures to prevent underage and problem gambling.
In its request for penalties, the state did not name a specific dollar figure for the amount of Polymarket’s alleged illegal gains. However, New York said that Polymarket’s business is reportedly valued at more than $20 billion and its annualized revenues are reportedly well over $1 billion.
Polymarket lawsuit. Polymarket seeks to enjoin enforcement by New York against its event contracts trading, which it says is prohibited by federal law and would cause “imminent and irreparable harm.”
Polymarket believes it “faces the imminent threat of enforcement by New York” due to the state’s “definitive position that similarly situated operators are violating New York’s state constitution, penal laws, and New York Racing Law.”
“Even a meritless state enforcement action would immediately disrupt Polymarket US’s federally authorized operations, fragment a national market, reduce liquidity, jeopardize critical banking and commercial relationships, undermine user trust, and harm New York residents,” Polymarket’s complaint stated.
The exchange also said it would lose out on potential business partners “who would steer clear of a company under a cloud of enforcement proceedings.”
Polymarket says New York’s attempted regulation is preempted because it is a lawful, national designated contract market and its event contracts are subject to the exclusive jurisdiction of the CFTC under the Commodity Exchange Act (CEA).
Polymarket seeks declaratory relief and preliminary and permanent injunctions enjoining New York from enforcing its civil and criminal gaming, gambling, and wagering laws or any other state law or regulation, to the extent it purports to regulate or prohibit Polymarket’s activities governed exclusively by federal law or otherwise conflicts with federal law.
The is case No. Unassigned (New York); 1:26-cv-08345-UA (Polymarket).
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