New York Sues Polymarket, Calling It an Illegal Gambling Operation

NEW YORK, Sept 24 (Reuters) — New York Attorney General Letitia James sued Polymarket on Thursday, accusing the prediction market platform of running an illegal gambling operation and escalating her broader fight with an industry she says violates state law.

The petition was filed nearly two months after James brought a similar case against Kalshi, a rival to Polymarket. In April, she filed comparable petitions against two other prediction market operators, Coinbase Financial Markets and Gemini Titan.

The case is the latest move by US states to rein in a sector that has surged in popularity since it outperformed traditional pollsters in forecasting Republican Donald Trump's victory over Democrat Kamala Harris in the 2024 presidential election.

Those state efforts have put them at odds with the Trump administration. The Commodity Futures Trading Commission has argued that it has exclusive authority to regulate prediction markets, setting up a federal-state clash over oversight.

Federal appeals courts are split on who should supervise the industry, increasing the likelihood that the US Supreme Court will eventually have to resolve the question.

Prediction markets are best known for allowing users to wager through so-called event contracts on the outcomes of sports events. They also commonly offer markets on elections and cultural events, including the Oscars.

The lawsuit against Polymarket could deepen legal uncertainty for the fast-growing industry. If states and federal regulators continue to collide, platforms may face a patchwork of rules that affects where they can operate and how they design products. A Supreme Court ruling could ultimately determine whether prediction markets are treated primarily as financial markets or as gambling services.

Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot.