Operators argue they are federally regulated by the CFTC

New York Attorney General Letitia James filed suit Thursday against Polymarket’s domestic arm, alleging that the bet-on-nearly-everything site was illegally running a gambling operation, escalating the state’s enforcement effort against the rapidly growing prediction-market industry.

New York, one of the largest markets for gambling in the U.S., is among several states seeking to bring prediction-market platforms under state gambling oversight. The state — where Polymarket and its chief rival, Kalshi, are based — has moved against multiple operators in the industry. In July, James sued Kalshi after negotiations between the company and Gov. Kathy Hochul’s office broke down, seeking as much as $36 billion in penalties and disgorgement. New York has also accused Coinbase and Gemini Titan of breaking state gambling laws with their prediction markets. States have argued that the platforms run unlicensed operations that cut into gambling tax revenue. A Polymarket spokesman didn’t immediately have a comment on the suit.

The New York enforcement effort is among the highest-profile legal challenges prediction-market operators face nationally. Conflicting rulings around the country have set the jurisdictional fight on a path toward the U.S. Supreme Court. Prediction-market operators argue they are federally regulated by the Commodity Futures Trading Commission, a position the Trump administration has strenuously backed.

James framed the action in terms of state law. “Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” she said in a statement.

Polymarket U.S., the regulated domestic arm of the company’s global operation, has had a bumpy year. The company balked at launching the app widely during a banner year for sports betting, as bugs, personnel problems and compliance issues plagued the rollout. The Wall Street Journal has reported that the U.S. app was flooded with fraudulent accounts soon after launch as the company pursued rapid growth.

New York City Council Speaker Julie Menin has separately raised the possibility of a council investigation into prediction-market marketing practices.

Polymarket has a data partnership with Dow Jones, the publisher of The Wall Street Journal.