New York Is Suing Polymarket Under State Gambling Law. In Its Own Courthouses, the Preemption Argument Has Gone New York's Way So Far.

On 24 September 2026 New York Attorney General Letitia James and Governor Kathy Hochul sued Polymarket’s US operator, QCX LLC, in what the state calls an unlicensed gambling operation. Coverage has framed it as a second round after the state sued Kalshi on 31 July, and some of it as a state coming back after losing on federal preemption. The record does not support that second framing. In New York’s own federal courthouse, the preemption argument has so far gone the state’s way. It has gone the other way in New Jersey, Arizona and Minnesota. That split, not the headline damages figure, is what the case turns on.

What the state is asking for

According to the Attorney General’s press release, the state alleges Polymarket runs an unlicensed gambling business: it holds no licence from the New York State Gaming Commission, its contracts meet the legal definition of gambling because outcomes are uncertain and outside the bettor’s control, and it lets users aged 18 to 20 trade when New York requires mobile sports bettors to be 21. The relief sought is an order stopping the unlicensed operation, forfeiture of all illegal gains, restitution to harmed consumers, and fines equal to three times the gains. Front Office Sports reports the petition has eight causes of action, naming violations of the New York State Constitution and the federal Interstate Wire Act, and does not list the other six.

The press release names no court and no dollar figure. The $4.6 billion number comes from a source who told Front Office Sports the state seeks at least that amount; the outlet says the petition itself specifies no damages and does not name the source. The figure is an unnamed person’s estimate of what treble gains might come to. For scale, the Forbes contributor Zennon Kapron reported that a $36 billion figure circulated for the Kalshi suit was Reason’s own tally of possible remedies, combining restitution, disgorgement, treble gains and $100,000 per unlawful offering, and that it may understate the exposure. Neither number is a demand the state has filed.

Why the state’s theory is not a workaround

The argument runs between two federal statutes. Platforms such as Kalshi and Polymarket argue the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts, which would override state gambling law. States answer that the same Act preserves state authority, and that a contract on a football game is a bet whatever the federal paperwork says. New York’s petition does not need to resolve that question at the pleading stage; it needs a court to let a state-law case proceed. The remedies, forfeiture and treble fines, are what state gambling statutes provide, which is why the dollar numbers can grow so large.

The courts have not agreed. In April 2026 the Third Circuit affirmed, 2–1, Kalshi’s injunction in New Jersey, holding that the CFTC has exclusive jurisdiction over sports event contracts, according to Forbes. CourthouseNews reports that on 27 July Judge Katherine Menendez preliminarily enjoined Minnesota from enforcing a law that would have made operating a prediction market a felony, finding Kalshi, Polymarket US and the federal government likely to succeed on preemption, and noting an Arizona federal court ruled similarly in May.

In Manhattan the result was different. CourthouseNews reports that on 7 July Judge Analisa Torres denied Kalshi’s motion for a preliminary injunction against New York regulators, finding Kalshi had not shown it was likely to succeed on preemption. She relied on the Act’s provision preserving state jurisdiction and wrote that “Congress did not intend to regulate so broadly as to exclude all state gambling laws” from covering swaps. Forbes reports Kalshi is appealing to the Second Circuit. Then, according to Cointelegraph, on or about 3 or 4 August Judge Jed Rakoff denied, without prejudice, the CFTC’s emergency request for a temporary restraining order that would have blocked New York’s case against Kalshi, finding the agency had not shown a high likelihood of success or irreparable harm. The agency could renew its request before Judge Victor Marrero.

Polymarket’s answer

Within hours of the filing Polymarket sued New York in federal court, according to Spectrum News, and also sought to move the state case to the Southern District of New York, per Casino.org. It seeks a declaration that the Commodity Exchange Act preempts New York’s gambling laws. Casino.org reports its lawyers argue it is not a counterparty to bets, operates a centralised exchange matching orders between third parties, earns a flat fee per transaction and does not profit when a bettor loses. They wrote that “event contracts are priced by supply and demand in a relevant market”, in contrast to a sportsbook setting odds. New York’s reply is that the contracts are bets and a platform offering them needs a licence, consumer-protection controls and problem-gambling safeguards. The reporting we reviewed does not say whether New York has asked for the case to be sent back to state court.

Spectrum News reports both Polymarket cases were pending on 28 September with no rulings, and that legislative proposals in Albany, Senator Joseph Addabbo’s ORACLE Act and Assemblymember John McDonald’s licensing bill, remain in committee. We found no ruling in either Polymarket case as of 10 October.

What this means for the legal map

Prediction-market operators lead in some courts and trail in others, and the facts differ. The Third Circuit decision concerned sports event contracts; the Minnesota injunction targeted a statewide ban and was framed around the status quo; Torres weighed a licensing regime that she said nothing stops Kalshi from joining. A disagreement of this kind is usually settled by a higher court. None has done so, and the cases here are at the preliminary stage. The practical consequence is that a platform can be lawful to operate in one state and the subject of a treble-damages action in another at the same time.

What the evidence does not establish

• The size of New York’s claim. The $4.6 billion figure is a single unnamed source’s estimate and is not in the petition.
• Which court will hear the case. Polymarket has sought federal court; the filing’s venue is not named in the press release.
• How the Second Circuit will treat preemption. Kalshi’s appeal is pending according to Forbes, and no appellate ruling was found.
• Whether Polymarket’s structure, a flat-fee exchange, changes the analysis. That is Polymarket’s argument and has not been tested against the state’s.