New York sues Polymarket, alleging it is running an illegal gambling operation

The case adds to a growing fight between prediction markets and state gambling regulators over who has the authority to oversee the products.

Prediction market companies argue that their event contracts are financial products overseen at the federal level by the Commodity Futures Trading Commission (CFTC). States have taken a different view, particularly when the contracts involve sports, arguing that the products are effectively bets and must follow state gambling rules.

New York has been one of the most active states in that fight. The state sued Kalshi in July after negotiations between the company and Hochul's office broke down, seeking as much as $36 billion in penalties and disgorgement. Many of these court cases have gone to appeals courts, and a recent case between Kalshi and New Jersey has been appealed to the U.S. Supreme Court.

“Our gambling laws exist to protect New Yorkers, prevent the potential harms of problem gambling, and ensure funding for educational and public benefit programs,” James said in a statement.

The lawsuit comes less than a year after Polymarket returned to the U.S. market.