By Jonathan Stempel
NEW YORK, Sept 24 (Reuters) - New York's attorney general sued Polymarket on Thursday, escalating her battle against prediction markets, an industry that she says violates state laws against illegal gambling.
Attorney General Letitia James filed her petition in a state court in Manhattan, two months after bringing a similar case against rival Kalshi, and five months after filing similar petitions against two other prediction market operators, Coinbase Financial Markets and Gemini
Titan.
All were accused of operating without obtaining required licenses from the New York State Gaming Commission. They were also accused of encouraging problem gambling, particularly among people under age 21, and endangering people's financial, emotional and physical health.
“By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law, they have put New Yorkers at risk, especially those underage who are most vulnerable to problem gaming," New York Governor Kathy Hochul said in a statement.
New York is seeking civil fines, the forfeiture of illegal gains, and full restitution to customers.
Prediction markets are best known for letting people wager through so-called event contracts on the outcomes of sports, though people can also wager on elections and cultural events such as the Oscars.
Polymarket expressed disappointment that state officials decided to sue.
"We chose to engage with them directly on the substance and address their concerns," Chief Legal Officer Neal Kumar said in a statement. "They preferred the media hit. Any time the (attorney general's) office wants to swing by, our door is open for a conversation about how we protect consumers and offer fair, transparent and legal markets."
TRUMP'S SON BACKS POLYMARKET
The case against Polymarket is the latest effort by US states to crack down on an industry that has soared in popularity since faring better than pollsters in predicting that Republican Donald Trump would beat Democrat Kamala Harris in the 2024 presidential election.
Those states are also at odds with the Trump administration, with the Commodity Futures Trading Commission claiming exclusive authority to regulate prediction markets.
Federal appeals courts are divided over who should oversee the industry, raising the prospect the US Supreme Court may need to decide.
Founded in 2020, Polymarket bills itself as "the world's largest prediction market."
It was out of the US market for more than three years, but relaunched last December following a green light three months earlier from the CFTC.
Polymarket also gained an investment last year from 1789 Capital, a venture capital firm backed by the president's oldest son, Donald Trump Jr. He is a partner there and a Polymarket adviser.
New York said the value of Polymarket's business reportedly exceeds $20 billion.
James views prediction markets as "quintessentially gambling" because they let people wager on events whose outcomes they don't control, and expect payouts if they win.
Thursday's petition included several recent examples at Polymarket, including whether the Los Angeles Dodgers baseball team would defeat the New York Mets on July 24, 2026 by more than 1.5 runs. The Dodgers won, 4-2.
New York also objected to Polymarket's letting 18- to 20-year-olds use its platform, despite a minimum age of 21 under state law for mobile sports betting.
By allowing gambling without state oversight, Polymarket is "exposing New Yorkers to gambling addiction with few, if any, safeguards," James said in the petition.
(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot)
