Johnny KampisNew York, long known for litigious actions against gambling operations, has sued Polymarket, two months after the state sued Kalshi, that platform’s chief competitor in the prediction market space.
The state filed suit against Polymarket on Sept. 24, with Attorney General Letitia James claiming in a statement that the platform is “skirting New York’s laws” and “targeting the most vulnerable and depriving New York families of critical services and support.” This lawsuit will only succeed in giving consumers fewer choices and fueling illicit operations.
To understand why, it is critical to make sense of what prediction markets are. Prediction markets allow users to buy contracts by choosing “yes” or “no” on everything from Bitcoin price changes to crude oil futures. The market has shifted toward more sporting events, as well, by allowing users to buy contracts on either side of games.
Here is an example of how it works: In DraftKings Predictions, a user in February could buy a contract on the Seattle Seahawks to win the Super Bowl by 4.5 points or more, choosing “yes” or “no.” The line on such contracts moves based on the number of users picking either side of the contract, much like a sportsbook will adjust a point spread in an effort to get half of its bettors on either side of the line.
Efforts by states like New York to curb the ability of Americans to use such prediction market platforms pushes them toward offshore operations not regulated by any U.S. authorities. Platforms such as Polymarket and Kalshi are regulated by the U.S. Commodity Futures Trading Commission (CFTC), which has sued several states in retaliation for their lawsuits asserting it has the right to regulate these markets.
The Coalition for Prediction Markets found that Americans traded up to $34 billion in offshore prediction markets in the 12-month period ending April 2026. That represents up to 31% of total prediction market activity, according to the study, and the volume of trading in these markets with no legal protection is expected to grow as more states seek to push the platforms out.
The New York lawsuit claims that Polymarket operates a platform in violation of state gambling laws and has no license with the state gaming commission. James used similar verbiage in the state lawsuit against Kalshi in July.
The lawsuit asks for penalties equivalent to three times the profits of Polymarket, with the added penalty of $100,000 for each attempt to offer sports wagering in New York. The lawsuit also wants Polymarket to provide a list of all trades placed on its platform, how much money users have lost, and how much money the company earns from those trades.
Polymarket countersued the state of New York. The platform’s chief legal officer, Neal Kumar, offered strong words in response to the lawsuit.
“Polymarket was founded in a tiny NYC apartment and now has more than 350 employees here, embodying why people and businesses come here to make it,” he said, as reported by CNBC. “We believe in New York and we’re staying here. While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users.”
The U.S. division of Polymarket began operating in December 2025. The company’s international division has existed since 2021.
The TimesUnion reported that the New York lawsuit could be more harmful to the industry because the U.S. divisions of Kalshi and Polymarket are based in New York City. Under New York state law, companies headquartered there can be forced to pay restitution to customers for illegal profits nationwide if a court decides a company violated statutes or regulations.
The legal maneuvering in New York on prediction markets began nearly a year ago when Kalshi filed for an unsuccessful injunction last October to prevent the New York State Gaming Commission from enforcing state gambling laws against the platform.
James sued Gemini Titan and Coinbase in separate filings in April, seeking permanent injunctions against those companies’ prediction markets. CFTC then sued New York to seek a permanent injunction to prevent the state from enforcing its laws against platforms registered with the CFTC.
On Aug. 12, the CFTC told Kalshi to continue operations in New York despite the pending lawsuit. The New York City Council opened investigations into advertising practices of four prediction market operators that same day.
Both Kalshi and Polymarket have recent evaluations exceeding $20 billion each. With the growth of prediction markets, so, unfortunately, have the efforts to regulate them.
Prediction markets serve consumers by giving them more choice and are particularly useful in states with either no live sports betting or no mobile sports betting. States like New York should back off efforts to curb prediction markets, which are already regulated at the federal level.
Johnny Kampis writes for the Taxpayers Protection Alliance
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