New York Sues Polymarket US Over Unlicensed Gambling Claims, Seeking Triple Gains and $100,000 Per Offer

Meta description: New York sued Polymarket US, seeking triple gains, restitution and $100,000 per unlicensed sports-wagering offer.

Tags: Polymarket, Letitia James, New York State Gaming Commission, CFTC, Kalshi, Event Contracts

Market platform: Polymarket

Category: Regulation

New York Attorney General Letitia James sued QCX LLC, doing business as Polymarket US, on September 24, alleging the CFTC-registered prediction market is operating an unlicensed gambling business in the state. Polymarket removed the case to federal court the same day and filed a separate lawsuit against James and New York State Gaming Commission officials.

What did New York allege against Polymarket US?

James’s verified petition in People of the State of New York v. QCX LLC, filed in New York County Supreme Court, says Polymarket offers event contracts on sports, elections and cultural outcomes that amount to gambling under New York law. The petition was announced jointly by James and Governor Kathy Hochul on September 24.

The state points to New York Penal Law § 225.00(2), which defines gambling as staking or risking something of value on a contest of chance or a future contingent event outside the bettor’s control, with the understanding that the bettor will receive something of value if a certain outcome occurs. The petition argues Polymarket’s event contracts fit that definition because users pay for positions tied to outcomes they do not control.

New York also cites Executive Law § 63(12), New York Constitution Article I, Section 9, Penal Law §§ 225.05, 225.10 and 225.20, Racing, Pari-Mutuel Wagering and Breeding Law §§ 1367(16)(a), 1367-a(2)(a) and 1367-a(4)(b), and the federal Wire Act, 18 U.S.C. § 1084(a). The state’s core theory is that federal commodities regulation does not give Polymarket permission to offer what New York considers sports wagering without a state gaming license.

The Office of the Attorney General’s September 24 announcement said its investigation found that Polymarket is an illegal, unlicensed gambling operation that exposes New Yorkers, including people below New York’s legal sports-betting age of 21, to personal and financial risk. The petition says QCX LLC is not licensed by the New York State Gaming Commission in any capacity.

What penalties is New York seeking?

New York is asking the court to block Polymarket from operating an unlicensed gambling business in the state, require an accounting of bets and customer losses, and order restitution, disgorgement, damages and penalties. The petition also seeks a penalty equal to three times Polymarket’s gain from the alleged illegal practices under Penal Law § 80.10.

The largest per-transaction exposure comes from Racing Law § 1367(16)(a). The petition asks the court to impose a $100,000 penalty for each offer or attempt to offer sports wagering or mobile sports wagering in New York without authorization. New York has not disclosed a total dollar estimate for the gains, restitution or per-offer penalties it will seek.

The state’s filing ties the licensing dispute to New York’s gambling-tax system. It says mobile sports wagering operators are taxed at approximately 51% of gross revenue and that sports-wagering tax revenue is used primarily for public schools, sports programs for underserved youth, and problem-gambling education and treatment. The petition says licensed mobile sports wagering operators generated about $2 billion in gross gaming revenue in 2024 and paid more than $1 billion in state taxes.

How did Polymarket respond in federal court?

Polymarket moved quickly to federal court. In James v. QCX LLC, docketed in the U.S. District Court for the Southern District of New York as No. 1:26-cv-08338, the docket shows a September 24 notice of removal from New York County Supreme Court. The docket lists the cause of action as 28 U.S.C. § 1442, the federal-officer removal statute, and identifies QCX LLC d/b/a Polymarket US as the defendant.

Polymarket also filed a separate federal complaint on September 24, QCX LLC v. James et al., No. 1:26-cv-08345, in the Southern District of New York. The Justia docket lists QCX LLC d/b/a Polymarket US as plaintiff and names James along with New York State Gaming Commission officials Brian O’Dwyer, John A. Crotty, Sylvia B. Hamer, Martin J. Mack, Peter J. Moschetti Jr., Marissa Shorenstein, Jerry Skurnik and Robert Williams as defendants.

That second case is docketed as a constitutional challenge to a state statute, with a cause of action under 7 U.S.C. § 1, the Commodity Exchange Act. Polymarket is asking a federal judge to resolve the same preemption question at the center of the broader industry fight: whether a state can apply gambling law to event contracts offered on a federally regulated derivatives exchange.

Polymarket’s position is that New York is trying to relabel CFTC-regulated event-contract trading as unlicensed gambling. Neal Kumar, Polymarket’s chief legal officer, also framed the dispute around the company’s New York presence, saying the company was founded in a New York City apartment and now has more than 350 employees in the city.

How does the case fit with New York’s Kalshi lawsuit?

The Polymarket case follows New York’s July 2026 lawsuit against Kalshi, which used a similar theory against another CFTC-registered event-contract exchange. In its September 24 Polymarket announcement, the Attorney General’s office described the case as part of a broader campaign to enforce New York gambling law against prediction-market and adjacent online-gaming businesses.

New York has also sued Coinbase and Gemini over prediction-market businesses, according to the Attorney General’s April 2026 announcement, and James issued a February 2026 industry alert warning that unlicensed sports-related event contracts could trigger civil and criminal penalties. That alert cited Racing Law §§ 1367(2) and 1367-a, Racing Law §§ 104(1) and 104(24), Executive Law § 63(12), and Penal Law §§ 225.05 and 225.10.

For prediction-market operators, the New York cases sharpen a question now moving through multiple courts: how much room states have to police sports and event contracts once an exchange is registered with the CFTC. For state regulators, the issue is whether federal derivatives law can be used to bypass state gambling licenses, age limits, sports-betting restrictions and tax obligations.

What happens next in the Polymarket case?

The first procedural fight is venue. In No. 1:26-cv-08338, the Southern District of New York will decide whether New York’s enforcement petition stays in federal court or returns to New York County Supreme Court. That threshold ruling will affect whether the case proceeds primarily as a federal preemption dispute or as a state-law gambling enforcement action.

The second track is Polymarket’s affirmative suit against James and Gaming Commission officials in No. 1:26-cv-08345. The next concrete filings to watch are any motion to remand in the removed enforcement case, any request for preliminary relief in Polymarket’s federal suit, and the first scheduling orders setting briefing dates in the Southern District of New York.