New York sues Polymarket over unlicensed sports betting

New York state has filed a lawsuit against Polymarket, alleging that the prediction platform offers sports wagers without the required licence. Attorney General Letitia James and Governor Kathy Hochul announced the case on Thursday, according to the source. The complaint is directed at QCX LLC, the company behind Polymarket US, which the authorities say runs an illegal gambling operation in New York.

The attorney general's office investigated Polymarket's offering and concluded that users can stake money on the outcome of sports events through the platform, for which the state says Polymarket lacks the necessary gambling licence. New York is asking the court to prohibit Polymarket from offering gambling in the state without a licence, and to order the company to pay fines, surrender illegally obtained revenue and compensate affected users.

The complaint also addresses the age at which users can access Polymarket. According to the state, the platform is available to users from the age of 18, while the minimum age for legal mobile sports betting in New York is 21. James also says Polymarket is not subject to the same obligations as providers that hold a gambling licence in the state, citing consumer protection and responsible gambling rules and the taxes licensed providers pay. James said the licensing system was set up to protect New York residents from the possible harmful effects of gambling, and that tax revenue from the regulated gambling market is used for education and responsible gambling programmes, among other things.

Polymarket did not limit itself to defending the complaint. A few hours after New York filed its case, the company went to the federal court in Manhattan with a lawsuit against James and other state officials, seeking to prevent New York from applying its gambling legislation to the platform. The company says its event contracts fall under the federal Commodity Exchange Act and that Polymarket US is supervised by the Commodity Futures Trading Commission (CFTC), so authority over the contracts lies at federal level with the CFTC. According to the company, New York should not additionally use its own gambling legislation against the offering.

Neal Kumar, chief legal officer of the prediction market, said he was disappointed by New York's action. He described the complaint as a recycled lawsuit and said Polymarket will contest it.

The legal arguments resemble those of rival Kalshi, which New York sued earlier this year over event contracts offered without a gambling licence. Kalshi also says that, as a CFTC-regulated market, it falls under federal law and that individual states are therefore not competent to regulate the contracts as gambling. Kalshi tried to prevent New York from acting against the company through the federal court; that attempt did not succeed for the time being, with a federal judge ruling that New York could continue acting against Kalshi during the proceedings. The prediction platform appealed that decision.