Polymarket Sues New York AG Letitia James Hours After Being Sued for Illegal Gambling

New York Attorney General Letitia James sued Polymarket on Thursday in Manhattan state court, alleging the prediction market platform operated an unlicensed gambling operation. Hours later, Polymarket filed its own lawsuit in Manhattan federal court, arguing that the Commodity Futures Trading Commission (CFTC) holds exclusive authority to regulate prediction markets and that New York has no power to enforce its gambling laws against the company.

James' complaint accuses Polymarket of operating without a required New York State Gaming Commission license while encouraging problem gambling, particularly among people under 21, and putting users' financial, emotional, and physical health at risk. Governor Kathy Hochul backed the filing, framing the platform's conduct as a knowing violation of state law. The state is seeking civil fines, forfeiture of alleged illegal gains, and full restitution to customers. Polymarket, founded in 2020, spent over three years outside the U.S. market before relaunching in December 2025 following a CFTC green light. The company has also drawn attention for an investment from 1789 Capital, a venture firm backed by Donald Trump Jr., who serves as a partner there and as a Polymarket adviser.

The two cases will proceed on separate tracks—James' claims in state court and Polymarket's declaratory action in federal court—with no hearing date yet set. The core question, whether state gambling law can reach a platform that claims exclusive federal oversight, remains unresolved nationally: federal appeals courts are currently split on the issue, a divide significant enough that the U.S. Supreme Court may ultimately need to settle it. This case extends a campaign James began earlier this year against Kalshi, Coinbase Financial Markets, and Gemini Titan, and other cities like Baltimore have joined in similar suits.