Polymarket US asked a federal judge in Manhattan on September 24, 2026, to block New York from enforcing state gambling laws against its event-contract exchange. The filing came the same day Attorney General Letitia James and Governor Kathy Hochul announced a state lawsuit accusing QCX LLC, which does business as Polymarket US, of operating illegal gambling in New York.
The two cases now put the same threshold question in front of federal courts: whether a CFTC-designated contract market can be treated as an illegal gambling operator under state law. Polymarket says the Commodity Exchange Act preempts New York’s civil and criminal gambling statutes. New York says the exchange offered sports wagering and other event contracts without a state gaming license.
What is Polymarket asking the federal court to do?
Polymarket wants the U.S. District Court for the Southern District of New York to bar New York officials from enforcing state gambling laws against its event contracts while the case proceeds, and to make that relief permanent if the company wins. QCX LLC filed the federal case on September 24 as QCX LLC d/b/a Polymarket US v. James et al., Case No. 1:26-cv-08345.
The defendants include Attorney General James, New York State Gaming Commission Chair Brian O’Dwyer, other commission members, and the commission’s executive director, Robert Williams, in their official capacities. Polymarket’s complaint argues express preemption, field preemption, and conflict preemption under the Supremacy Clause.
The core theory is that Congress gave the Commodity Futures Trading Commission exclusive jurisdiction over swaps traded on federally designated exchanges, and that state gambling enforcement cannot be used to shut down contracts listed on those markets. Polymarket argues that New York’s action would force it to stop operating in the state and interfere with a federally regulated derivatives market.
The complaint follows the CFTC’s July 9, 2025 designation of QCX LLC as a contract market. Polymarket US later began offering event contracts in the United States, including sports-related markets that are now at the center of New York’s enforcement case.
What does New York’s lawsuit accuse Polymarket of doing?
New York’s lawsuit, filed in New York County Supreme Court, says Polymarket US offered unlicensed gambling products to New Yorkers and accepted customers ages 18 to 20 in a state where legal mobile sports betting starts at 21. The Attorney General’s September 24 announcement says the state is seeking to halt the operation, recover illegal gains, obtain restitution for users, and impose civil penalties.
The Attorney General’s office said Polymarket did not obtain a license from the New York State Gaming Commission and did not pay the taxes and fees required of licensed casinos or mobile sportsbooks. The state framed the case as both a gambling-law action and a consumer-protection matter.
James said in the announcement that her office would enforce New York gambling law against companies offering wagers without a license. Hochul said the state would not allow operators to bypass New York’s gaming rules.
The state complaint cites sports markets and other event contracts, including markets tied to New York Knicks games, the New York governor’s race, and television elimination contests. New York’s requested relief includes a halt to the alleged unlawful activity, forfeiture of gains, restitution, and penalties tied to unauthorized offers of sports wagering.
Polymarket removed the state enforcement case to the Southern District of New York, where it was docketed as Case No. 1:26-cv-08338. That removal puts the state action and Polymarket’s preemption suit in the same federal courthouse, although the state can still seek to send its enforcement case back to state court.
Why does Kalshi’s New York ruling matter?
Polymarket is asking the same federal district for relief that Kalshi failed to obtain in July. In KalshiEX LLC v. New York State Gaming Commission, No. 1:25-cv-08846, U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction against New York gambling enforcement on July 7, 2026.
Torres held that Kalshi had not shown a likelihood of success on its argument that the Commodity Exchange Act preempts New York gambling laws as applied to sports event contracts. The order also weighed the public-interest factors against Kalshi, citing New York’s interests in regulating gambling, protecting consumers, and preserving sports integrity.
That ruling does not automatically decide Polymarket’s case, but it is a direct warning sign for any exchange making the same preemption argument in the Southern District of New York. Polymarket argues that it is not a sportsbook because it runs an exchange, charges transaction fees, and does not take the other side of customer trades. Kalshi made similar structural arguments in its New York case, and Torres did not find them enough to support preliminary relief.
Kalshi appealed Torres’s ruling to the U.S. Court of Appeals for the Second Circuit. Until that court rules, the Southern District’s most direct New York precedent remains unfavorable to exchange operators seeking to block state gambling enforcement at the preliminary-injunction stage.
Where does the national preemption fight stand now?
The appellate map is now mixed and more crowded than a simple two-circuit split. The Third Circuit sided with Kalshi in litigation against New Jersey in April 2026, holding that federal commodities law preempted the state’s attempt to regulate the exchange’s federally listed contracts as gambling. New Jersey has asked the U.S. Supreme Court to review that decision.
The Ninth Circuit reached the opposite result in Kalshi’s Nevada case in August 2026, holding that the Commodity Exchange Act did not displace state gaming authority in the way Kalshi claimed. That ruling gave states a major appellate win in the fight over sports-event contracts.
The Sixth Circuit added another state-side ruling on September 25, 2026, one day after New York sued Polymarket. In Kalshi’s Ohio and Tennessee appeals, the court held that Kalshi had not shown its sports-event contracts were swaps covered by the Commodity Exchange Act’s preemption provision, and it declined to block those states’ gambling laws.
Those appellate rulings matter because Polymarket’s New York case turns on the same statutory fault line: whether federally regulated event contracts are protected from state gambling enforcement, especially when the contracts involve sports. The answer now varies by court, and the Supreme Court petition in the New Jersey case gives the dispute a possible national path.
What are the stakes for Polymarket in New York?
New York is one of the most important states for the prediction-market industry’s legal fight because it combines a large customer base, an active gaming regulator, and the Southern District of New York’s role as a major financial-law forum. For Polymarket, the dispute is especially direct: the company is trying to preserve access to New York while defending the legal status of its U.S. exchange model.
The case also broadens New York’s campaign against event-contract platforms. The state had already fought Kalshi over sports contracts before suing Polymarket. The new complaint shows that New York is not treating the issue as a one-company dispute, but as a broader challenge to exchanges offering sports-linked contracts without a state gaming license.
For the prediction-markets industry, the immediate question is whether federal designation by the CFTC is enough to prevent state gambling regulators from intervening. For state officials, the question is whether exchanges can use federal commodities law to reach products that look, in their view, like sports betting and other wagers.
What happens next?
The next procedural steps are in federal court. New York must respond to Polymarket’s request for injunctive relief in Case No. 1:26-cv-08345, and the removed state enforcement case, Case No. 1:26-cv-08338, may face a remand fight over whether it belongs in federal or state court.
The legal calendar now runs through several courts at once: Polymarket’s new Southern District of New York case, Kalshi’s Second Circuit appeal from the July New York order, the Sixth and Ninth Circuit rulings favoring state authority, and New Jersey’s Supreme Court petition from the Third Circuit decision. The next ruling in Polymarket’s case will show whether New York’s latest enforcement action follows the Kalshi path or produces a different result for a second CFTC-designated event-contract exchange.
Meta description: Polymarket sued New York in federal court after the state accused its U.S. exchange of illegal gambling and unlicensed sports wagering.
Tags: Polymarket, New York Attorney General, CFTC, Kalshi, New York State Gaming Commission, Commodity Exchange Act
Market platform: Polymarket
Category: Regulation
