New York state sued Polymarket’s domestic arm on Thursday, alleging the platform’s sports-based event contracts amount to little more than an illegal gambling operation that violates state law and endangers New Yorkers.

The lawsuit, brought by New York Attorney General Letitia James in a state court in Manhattan, is a high-profile escalation in the fight over whether prediction market platforms should be forced to abide by the gambling laws of the states in which they operate.

“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” James said in a statement Thursday. “By skirting New York’s laws, Polymarket is targeting the most vulnerable and depriving New York families of critical services and support.”

In New York, where Polymarket and its largest competitor Kalshi are based, James has been vocal about the need to regulate the rapidly expanding industry under state, rather than federal, law. James filed a similar lawsuit against Kalshi in July and has taken legal actions against smaller platforms Coinbase and Gemini. (In response to the suit, Kalshi accused state leadership of “political theater.”)

“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 Gov. Kathy Hochul said in a statement.

Speaking of the attorney general’s office, Polymarket Chief Legal Officer Neal ​Kumar told MS NOW in a statement, “We chose to engage with them directly on the substance and address their concerns.” He added that “any time the AG’s office wants to swing by, our door is open for a ​conversation about how we protect consumers and offer fair, transparent and legal markets.”

In most states, the legal age to participate in casino and sports betting is 21 years old. But to place bets on both Polymarket and Kalshi, users only need to be 18 years old.

Prediction markets are federally regulated under the Commodity Futures Trading Commission. But at least 20 states have made the case this year that the platform’s sports-related event contracts are a form of illegal betting that violates local gambling laws and siphons valuable tax revenue.

President Donald Trump, however, has rejected that argument, and his CFTC has taken aggressive measures to assert federal jurisdiction over prediction markets.

The CFTC’s confrontational approach to jurisdiction has advanced as the Trump family has maintained financial ties to both Polymarket and Kalshi.

Trump’s oldest son, Donald Trump Jr., sits on the board of advisers of both companies, and he holds a large volume of shares in Kalshi and has invested in Polymarket through his venture capital firm, 1789 Capital. He has publicly denied that his ties to the prediction markets have influenced federal policies or enforcement actions.

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