New York AG Letitia James sues Polymarket for illegal gambling

New York Attorney General Letitia James sued crypto‑prediction platform Polymarket on Thursday, accusing the company of running an illegal gambling operation in violation of the state’s Gaming Law. The complaint seeks an injunction to halt the service, a civil penalty of up to $5 million, and restitution for New York users who allegedly lost money on the platform. James’ office says Polymarket allows users to bet on outcomes ranging from election results to sports scores without a proper gambling license, making the business unlawful under state law.

The case follows a July lawsuit against rival prediction‑market operator Kalshi, which the state also claimed was operating without a license. Both actions reflect a broader crackdown on crypto‑based betting platforms that blur the line between financial speculation and gambling. Regulators argue that many of these services sidestep traditional oversight, leaving consumers vulnerable to fraud and loss. The New York suit comes as the Securities and Exchange Commission and the Commodity Futures Trading Commission intensify scrutiny of digital‑asset markets, and as lawmakers push for clearer rules on how blockchain‑based products should be regulated.

Polymarket has denied the allegations, saying it complies with all applicable laws and that its markets are “information‑based” rather than gambling. The company’s legal team warned that the lawsuit could set a dangerous precedent for innovation in the crypto space. A court hearing is scheduled for later this month, where a judge will decide whether to issue a temporary restraining order. If the injunction is granted, Polymarket would have to suspend its U.S. operations, potentially reshaping the nascent prediction‑market industry and prompting other platforms to seek licenses or redesign their products to avoid similar legal challenges.