For nearly two years, the question New York’s attorney general put to a court on Sept. 24 has been the same question Polymarket asks its users every day: what happens next. This time the answer will be decided by a judge rather than a market.
Attorney General Letitia James filed suit against the prediction-market platform, accusing it of running an unlicensed gambling business in the state. The filing argues that the contracts Polymarket offers, wagers on elections, sports and other events, fall under New York’s gambling laws and require a license the company does not hold. Polymarket has not issued a public response.
The action is the second time in as many months that James has gone after a prediction market. In late July she sued Kalshi on similar grounds, alleging the exchange failed to obtain a New York State Gaming Commission license and exposed consumers, some between 18 and 20 years old, to financial harm. In April she and Governor Kathy Hochul defended the state’s enforcement push, and James joined 37 other attorneys general in a brief supporting Massachusetts’ own lawsuit against Kalshi.
The strategy is now clear. New York is treating prediction markets as gambling and is prepared to litigate them one platform at a time. Analysts said the choice of Polymarket as the next target was expected, given that it is the most recognizable name in a category that grew quickly during the 2024 U.S. election.
Polymarket rose on exactly that election. The platform, founded in 2020 by Shayne Coplan, lets users buy and sell shares in the outcome of future events, with prices that move as new information arrives. During the 2024 presidential race its volume surged, and it became a fixture of political coverage, with traders citing its odds alongside polls. That popularity drew scrutiny in turn. The Commodity Futures Trading Commission settled with the company in January 2022 for $1.4 million over event-based contracts it offered without registration, and the firm has since barred U.S. users from trading on its main market.
The legal question is whether a contract on an event is a financial instrument or a bet. Polymarket and its backers describe the markets as a way to surface information and hedge risk, not unlike futures. Regulators in some states see the same product as a wager by another name, one that lets people stake money on outcomes ranging from an election to a sports result without the licensing and consumer protections that govern casinos and sportsbooks.
The company’s backers include some of the best-known names in technology investing. Peter Thiel’s Founders Fund led a $45 million funding round in 2024, part of the $70 million the company had raised by that point, on the argument that prediction markets are a more honest way to price the future than polls or pundits. That framing matters to the defense: if the contracts are information markets rather than bets, they may sit outside New York’s gambling statute.
The counterargument, laid out in the New York filing, is that the label does not change the substance. A person who puts money on the outcome of a sporting event or an election, the state contends, is gambling whether the platform calls it a trade or a contract. The filing asks the court to halt the activity and impose penalties.
After the 2024 election, the platforms did not slow down. They expanded into sports, entertainment and business events, and the category kept growing even as its legal footing stayed unsettled. Polymarket in particular pushed into sports contracts, the very product that has drawn the attention of gambling regulators, who see little difference between a bet on a game and a contract on its outcome.
A ruling against Polymarket could give other states a template, and the patchwork of state rules has already produced a strange map in which the same contract is legal in one state and prohibited in another. Companies in the sector have responded by splitting their U.S. and offshore operations, a structure the New York filings appear determined to test.
The fight is unlikely to end in one courtroom. The industry has pushed for federal rules that would preempt the state-by-state battles, and the CFTC holds its own authority over event contracts. But that preemption argument has not yet prevailed, and until it does, companies like Polymarket face the prospect of being sued in every state that draws the line differently.
For James, the case extends a pattern. Her office has spent years suing cryptocurrency exchanges and other firms it says flout New York’s consumer-protection rules, and she has cast prediction markets as the latest front. The political calendar adds another layer: she is on the ballot this November, and the enforcement push has drawn both support and criticism.
What happens next will itself be watched the way Polymarket users watch everything, as a series of odds to be priced. But the near-term question is simpler than any contract the platform lists. It is whether a court agrees that a market and a bookmaker are, in New York, the same thing.
