News24 September, 20263 min read

Polymarket paid $112M for a regulated US comeback. New York says it's still illegal gambling

Polymarket spent $112 million securing a federally regulated route back into the U.S., but New York is testing whether that federal stamp protects it at all.

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New York Attorney General Letitia James sued Polymarket on Thursday, alleging the crypto prediction market is operating an illegal gambling business under state law, according to a Sept. 24 statement from James and Gov. Kathy Hochul republished by LongIsland, a regional news website covering Long Island, New York.

The case follows similar actions against Kalshi, Coinbase Financial Markets and Gemini Titan, all operators of federally regulated prediction markets.

Polymarket already paid for the regulated route

In July 2025, Polymarket bought QCEX, a derivatives exchange and clearinghouse, for $112 million, explicitly saying the acquisition would pave the way for a "fully regulated" U.S. return.

QCX had become a designated contract market, or DCM, regulated by the Commodity Futures Trading Commission, earlier that month.
The CFTC then cleared Polymarket's return to the U.S. in September 2025.
Today, the regulator officially lists QCX LLC d/b/a Polymarket US as a designated exchange.

So the fight is no longer about an offshore crypto site avoiding U.S. regulation, but more about whether a platform regulated as a derivatives exchange federally can still be treated as an unlicensed sportsbook by individual states.

The federal regulator is already suing New York

The CFTC itself sued New York on April 24, specifically seeking to stop the state from applying gambling laws to CFTC-registered prediction markets.

The regulator argues Congress gave it exclusive authority over event contracts.
New York argues sports and other event contracts can still amount to gambling under state law.
That federal case remains pending.
Courts haven't agreed on the answer either.

The Ninth Circuit ruled in August that Nevada could regulate Kalshi's sports contracts as gambling, while the Third Circuit reached the opposite conclusion in a New Jersey case. New Jersey has already asked the U.S. Supreme Court to settle the split.

Polymarket has already lost a similar early round elsewhere. A Nevada judge in June blocked it from offering sports, election and entertainment contracts in the state while Nevada's case proceeds.

Polymarket Prediction Markets