The legal confrontation between New York and prediction markets has intensified, with the state now targeting Polymarket. This comes just months after a similar lawsuit was filed against Kalshi. In response, Polymarket has initiated its own lawsuit against New York.
This situation is part of a broader wave of regulatory and legal developments, which also includes litigation involving California Tribal lands, a setback for the NCAA in Indiana, and a potential merger reversal concerning MGM Resorts.
In the latest news, New York has filed a lawsuit against Polymarket regarding its event contracts, marking a significant escalation in the state's ongoing battle with prediction markets. Similar to the lawsuit against Kalshi from July, the new complaint claims that Polymarket is running an illegal gambling operation without the necessary gaming license from New York. The state is pursuing an injunction, restitution, and penalties, which could amount to $100,000 for each alleged unauthorized sports betting offer.
Additionally, New York contends that Polymarket allows users aged 18 to 20 to participate, while the state mandates that mobile sports bettors must be at least 21 years old.
As with previous lawsuits, Polymarket has moved the case from state court to the Southern District of New York, arguing that federal jurisdiction is warranted due to allegations of a Wire Act violation and questions surrounding the Commodity Exchange Act (CEA) and the authority of the Commodity Futures Trading Commission (CFTC) over event contracts.
Furthermore, Polymarket has filed a separate lawsuit against New York gaming officials, seeking both declaratory and injunctive relief to block the enforcement of state gambling laws against its federally regulated exchange. The company asserts that the CEA grants the CFTC exclusive jurisdiction over its event contracts.
This argument has faced challenges in the federal district, as evidenced by a July ruling where a federal judge denied Kalshi's request for a preliminary injunction, stating that Kalshi had not demonstrated that New York's gambling laws were preempted by the CEA in relation to its sports event contracts. Kalshi is currently appealing this decision.
In addition to these developments, New York has also taken legal action against cryptocurrency platforms Coinbase and Gemini, while the CFTC has filed a separate suit against the state.
In another development, Kalshi has reportedly geofenced around three California tribes amid ongoing litigation regarding sports event contracts on tribal lands. Analyst Mick Bransfield noted that Kalshi's attorney informed the court about this geofencing measure, although tribal representatives argued that it does not mitigate their claims of irreparable harm.
This hearing occurred shortly after the Ninth Circuit Court ruled that the tribes are likely to prevail in their assertion that Kalshi's sports event contracts qualify as Class III gaming under the Indian Gaming Regulatory Act (IGRA) when conducted on tribal lands. The appeals court overturned the district court's dismissal of the IGRA claim and sent the case back for further consideration of the remaining factors for a preliminary injunction.
Lastly, the Indiana Gaming Commission has rejected the NCAA's request to ban all college player prop bets, marking a significant decision in the ongoing discussions around college sports betting.