New York Sues Polymarket US, and Polymarket Sues Right Back

New York Attorney General Letitia James, supported by Governor Kathy Hochul, has filed a petition in the Supreme Court of the State of New York against QCX LLC (doing business as Polymarket US), alleging the platform operates an illegal, unlicensed gambling business within the state. The state’s special proceeding demands an immediate statutory injunction, accounting of user funds, disgorgement of revenues, and statutory civil penalties.

Within hours of the state court filing, Polymarket removed the action to federal court and launched a federal countersuit against the Attorney General and the New York State Gaming Commission (NYSGC) in the U.S. District Court for the Southern District of New York (SDNY). Polymarket argues that state gambling laws are preempted by federal commodities law.

Seven Violations and a Home-Field Problem

The Attorney General’s petition focuses on QCX LLC, a Delaware entity headquartered in New York City. Under Executive Law § 63(12), the state can enjoin persistent fraud or illegality in commercial business. It starts with the gambling ban in the state constitution and moves through the Penal Law, including taking more than five bets totaling more than $5,000 in a single day. There’s also a charge for possessing gambling records, a separate offense in New York. The state says Polymarket’s own “Daily Market Reports” and trade confirmations are exactly that kind of record. The last one is the federal Wire Act.

The state also wants an accounting of every bet placed, the money customers lost and the money Polymarket took in, plus restitution to users.

The Age Gap Hochul Keeps Raising

New York requires anyone betting on mobile sports to be at least 21. The petition says Polymarket lets people aged 18 to 20 open accounts, and Hochul made that the center of her statement. “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,” she said.

Keeping under-21s out is one of the basic Responsible Gambling duties the state’s licensed sportsbooks carry, and they pay tax for the privilege. Polymarket, the state says, does neither.

What Polymarket Allegedly Sold New Yorkers

The petition quotes Polymarket’s own marketing back at it. The company launched its US app on December 3, 2025, announcing it was “launching with sports,” to be “followed by markets on everything,” and it advertised itself as “legal in all 50 states.” It offered New Yorkers markets on the Knicks against the Spurs in the NBA Finals, the “New York Governor Election Winner” and which contestant would be eliminated in week four of Big Brother Season 28.

It paid people to join, too. On August 5, 2026, Polymarket posted that “[n]ew traders get $20 with code FREE20,” the petition says, and a referral program paid out when a friend signed up and deposited at least $10.

The money on the other side is large. The petition says the business is reportedly valued at more than $20 billion, with annualized revenue reportedly well over $1 billion since the US launch. Licensed mobile sportsbooks in New York generated about $2 billion in gross gaming revenue in 2024 and paid more than $1 billion in state taxes, according to the same filing.

A Federal Fight Polymarket Picked Itself

Polymarket did not wait. Later on Thursday it moved to take the case from state court in Manhattan to the Southern District of New York, CNBC reported, and filed its own federal suit against James and officials of the Gaming Commission. That suit calls the state’s gambling theory “erroneous” and says New York is enforcing state gambling laws against “federally regulated derivatives exchanges,” and it calls that “enforcement Congress has expressly prohibited.”

Chief legal officer Neal Kumar went after the filing itself. “”While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users,” Kumar stated. “We didn’t run to preemptively sue the state—we chose to engage with them directly on the substance… They preferred the media hit.”

The Kalshi Case Shows How This Could Go

The Kalshi precedent is not encouraging for either side. In that suit, New York sought a temporary restraining order barring Kalshi from offering all event contracts nationwide and more than $36 billion in damages. The Commodity Futures Trading Commission answered on August 11 by using its emergency authority to order Kalshi to keep operating. “New York has no business regulating these interstate financial markets,” CFTC Chairman Michael Selig said at the time.

New York is also working through a list. James secured $8 million from sweepstakes operator VGW on September 9, and she sued Coinbase and Gemini over prediction markets in April. Other states are moving on the same products. Connecticut’s cease-and-desist orders went to nine platforms including Polymarket on September 10, and Missouri’s attorney general sent letters to six companies, Polymarket among them, a week later.

New York asked a court to act. Polymarket had its own federal lawsuit on file before the day was out.