The state of New York recently submitted a lawsuit against prediction market platform Polymarket. It didn’t take long for them to answer back.
Per reports, Polymarket has sued New York Attorney General Letitia James, attempting to block the state from regulating its prediction market site. The legal landscape for prediction markets continues to grow in stature, with New York becoming one of the key battlegrounds in the conversation on legality and regulation.
New York Targets Polymarket for Breaking Gambling Laws
New York drew first blood recently, targeting Polymarket with a lawsuit over the prediction market platform breaking state gambling laws. New York’s lawsuit argues that Polymarket should abide by state gambling laws and licensing guidelines.
Per reports, the attorney general’s office has stated that Polymarket essentially is an illegal gambling operation within the state. New York residents within the ages of 18 and 20 are able to participate in event contract trading, despite the state listing 21 as the age for legal online sports betting.
New York has sought legal prevention of Polymarket conducting business in the state. The lawsuit also demands for the prediction market platform to be classified as an unlicensed gambling entity and be subject to the appropriate fines.
This isn’t an isolated case from New York, either. The state has also conducted similar legal action against other big players in the prediction market scene, such as Kalshi and Coinbase Financial Markets.
Polymarket Responds with Lawsuit
Polymarket isn’t taking this lawsuit sitting down. The prediction market company has responded with its own lawsuit, targeting New York Attorney General Letitia James.
The site’s lawsuit argues that the Commodity Futures Trading Commission (CFTC) holds exclusive authority over all federally regulated prediction markets. In addition, prediction markets view themselves as federally approved exchange markets, and define themselves as operating differently than traditional sportsbooks.
Polymarket also argues the allowance of states to impose online gambling laws despite the difference in definition undermines the federal framework already established.
Another issue brought up is the natural conflict of the argument and how it’s been carried out in other U.S. states. Rulings in Nevada and New Jersey, for instance, went in opposite directions, creating an interesting divide at the government level.
Other Prediction Markets Welcome Regulation
This situation is made more interesting by Kalshi’s open-minded approach to prediction market regulation.
Kalshi CEO Tarek Mansour recently sat down with PBS NewsHour to discuss questions surrounding the industry, and he responded by stating that Kalshi “wants more guardrails” and is a champion of more regulation.
This doubles down on the prediction market industry’s position; it welcomes change and regulatory action, but wants to be defined properly. Most of all, it implements regulation and craves more concrete guidelines, so long as it doesn’t lean to prediction markets being wrongly classified as sports betting entities.
The Trade Handle Prediction Markets Take
The real issue here is states wanting power over an industry that has already been federally regulated.
Their motive is obvious, too, as Tribal nations want to continue to maintain gambling jurisdiction in states that reward it, while states that allow online betting want to force Kalshi into paying taxes and licensing fees.
Nobody can blame states for trying to fatten their wallets, but the bid for a bigger piece of the pie isn’t exactly being done in good faith. Prediction markets have been approved on a federal level, they’re already regulated, and they by definition are not the same as online sportsbooks.
At some point, there needs to be some sort of middle ground, and the inconsistency from state to state may demand a trip to the U.S. Supreme Court to give a final answer.