From Ars Technica · · 2m
New York sues Polymarket over illegal gambling
New York is taking on a prediction market platform it says is gambling in disguise, defying the Trump administration's support for the industry.
In brief
New York is taking on a prediction market platform it says is gambling in disguise, defying the Trump administration's support for the industry. New York is suing Polymarket for operating an unlicensed gambling business that evades taxes, exposes minors, and deprives the state of education funding, even as the federal…
New York sues Polymarket today
Governor Kathy Hochul announced a lawsuit against Polymarket, alleging it runs an illegal gambling operation that puts New Yorkers at risk, especially minors vulnerable to problem gaming.
“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.”
Tax evasion and lost revenue
Polymarket sidesteps taxes that licensed casinos and sports betting platforms pay, depriving New York of revenue for public schools, youth sports programs, and problem gambling treatment.
“This tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment.”
Minors can access the platform
Polymarket allows users aged 18 to 20 to gamble, violating New York law that requires people to be at least 21 for mobile sports betting, exposing young people to gambling's damaging effects.
Trump admin backs prediction markets
The Commodity Futures Trading Commission asserts exclusive jurisdiction over prediction markets and declared a market emergency in New York to stop the state from applying gambling laws to rival platform Kalshi.
Gambling with a different name
Polymarket and Kalshi offer sports bets as event contracts or swaps, but New York argues these are simply gambling under a different label designed to evade state regulation.
“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs.”
What New York is seeking
The lawsuit asks for a court order stopping Polymarket from operating as an unlicensed gambling business, plus fines, forfeiture of illegal gains, and restitution to users.
Polymarket's workaround strategy
Polymarket's main platform was ruled illegal in 2022, but it launched a mobile app version in December 2025 after acquiring QCX, a federally licensed firm, to operate in the US.
Polymarket fights back
Polymarket called the lawsuit a recycled copy of New York's case against Kalshi and said it chose to engage directly with the state rather than sue preemptively.
“While the AG's decision to copy/paste a recycled lawsuit is disappointing, we'll fight for our users.”
Supreme Court may settle it
Federal appeals courts disagree on whether prediction market bets are swaps under federal law or gambling under state law. The Supreme Court may ultimately decide if states can restrict these platforms.
The key point
New York is suing Polymarket for operating an unlicensed gambling business that evades taxes, exposes minors, and deprives the state of education funding, even as the federal government backs prediction markets.
