A lawsuit seeking restitution and disgorgement was filed against the digital platform for violating state laws governing sports and election contracts. The New York Attorney General's civil enforcement action, initially brought in NY County Supreme Court, alleges that the prediction market ran an illegal gambling operation. Polymarket has since removed the legal proceedings to federal court in the Southern District of New York (SDNY).

The filing is part of an escalation in the state's crackdown on prediction markets, coming two months after New York filed a similar lawsuit against rival Kalshi in July. The current action targets the site's offering of contracts related to sports, culture and elections, and seeks an injunction along with civil penalties.