Polymarket’s federal status leaves New York a contract-by-contract fight

New York and Polymarket filed opposite claims about the same trades

A Polymarket user buys a position tied to an event and trades against another user at a market price. Polymarket says it supplies the exchange and charges fees instead of setting house odds. New York describes the same transaction in the language of its gambling statute: a person risks money on a future event outside that person’s control and receives value if the selected outcome occurs. Whether those mechanics amount to gambling is the disputed classification.¹²³

New York says QCX LLC, doing business as Polymarket US, has offered unlicensed gambling since its U.S. launch in December 2025. The state also says the platform admits customers at 18 even though mobile sports betting in New York begins at 21. It seeks to block the service in the state and obtain restitution, forfeiture, and fines. Those are allegations and requests for relief, not findings. The state-court petition was not available from a stable public source when this article was reported, so its exact counts cannot be stated here.¹

Polymarket filed its own federal suit the same day. According to Reuters, it wants a declaration that New York cannot apply its civil and criminal gambling laws to the federally regulated exchange. Its chief legal officer, Neal Kumar, said the company would “fight for our users.” The federal complaint also was not publicly retrievable during reporting, so Polymarket’s precise counts and citations remain unverified. Its public theory can still be tested: federal law gives the Commodity Futures Trading Commission exclusive jurisdiction over covered transactions on a designated contract market, or DCM, and state gambling enforcement would obstruct that regime.²

That theory contains an unanswered step. The CFTC designated Polymarket US as an exchange. A court still has to identify which transactions fall inside the federal grant, what the CFTC did with the particular product, and whether the state is regulating the trade itself or pursuing a duty that federal law preserves. Designation does not supply those answers.

The CFTC designates venues and reviews products separately

Polymarket’s federal status is real. The CFTC’s registry lists QCX as a designated contract market as of July 9, 2025.⁴ A November amended order allowed intermediated customer access after representations about surveillance, reporting, and clearing. The order also says the exchange remains subject to the Commodity Exchange Act, CFTC regulations, and the self-regulatory duties of a DCM.⁵ Designation establishes the venue’s regulatory status and obligations. The order contains no adjudication that every event contract is lawful or immune from state law.

Products enter by a different route. In a September 2025 filing, QCX self-certified a class of athletic-event contracts for listing. It described cash settlement, an athletic event as the underlying, and an official result chosen by the exchange as the settlement source. QCX also certified that the contracts complied with the Act and CFTC rules.⁶ Self-certification is the exchange’s compliance representation. It is not a merits order from the Commission.

The Commodity Exchange Act’s exclusive-jurisdiction clause gives the CFTC exclusive jurisdiction over transactions involving swaps or futures traded or executed on a DCM, subject to listed exceptions. The same provision preserves other state and federal authorities outside that covered field.⁷ A platform therefore cannot complete the preemption argument by pointing only to the letters DCM. It must show that the transaction is one Congress placed inside the exclusive grant.

Congress also supplied a special rule for event contracts. The CFTC may review contracts involving unlawful activity, terrorism, assassination, war, gaming, or similar activity and prohibit those it finds contrary to the public interest. Once the Commission commences the specified review, the statute provides a 90-day period unless the exchange agrees to an extension.⁸ The current regulation says a registered entity “shall not list for trading” an excluded-commodity contract that relates to gaming or unlawful conduct.⁹ Courts now disagree about what those provisions mean when an exchange self-certifies a sports contract and the CFTC does not issue a product-specific order.

New York defines gambling by conduct

New York’s argument begins with what customers and the platform do. State law defines gambling to include risking something of value on a contest of chance or a future contingent event outside the person’s control, under an agreement to receive value upon a specified outcome. Its definition of advancing gambling activity reaches creating, soliciting, conducting, financing, and recording the activity. Bookmaking covers unlawfully accepting public bets as a business on future contingent events.¹⁰

Those definitions explain why Polymarket’s user-to-user structure matters without ending the inquiry. A peer supplies the opposite side of the trade and market activity produces the price. Those features distinguish Polymarket from a sportsbook that posts its own odds and takes the other side. Yet the state statute reaches business conduct that facilitates and records the wager. If New York’s definitions apply, avoiding house-bettor status would not by itself avoid the state’s theory.³¹⁰

Civil remedies add a second state interest. Executive Law § 63(12) authorizes the attorney general to seek injunctions, restitution, damages, and other relief for repeated illegal acts or persistent illegality in business.¹¹ The official announcement links the case to underage access and financial harm as well as licensing. Without the petition, however, it would be wrong to report a freestanding deceptive-practices count or identify § 63(12) as a pleaded cause of action. The available record supports a remedial and consumer-protection concern, not that missing pleading detail.

This separation matters under Polymarket’s federal theory. Even the strongest appellate decision for an event-contract exchange distinguished direct state regulation of DCM trading from ordinary common-law and general antifraud actions that do not regulate the trading itself.¹² Its distinction makes the object of each state claim decisive. “State enforcement” is too broad a category to decide preemption.

Two circuits reached opposite answers on sports contracts

The Third Circuit supplied the exchange side’s best authority in April. In KalshiEX LLC v. Flaherty, a 2–1 panel affirmed preliminary relief against New Jersey. The majority concluded that Kalshi had a reasonable chance of showing its sports contracts were swaps because their payouts depended on events with economic consequences. It found both field and conflict preemption likely. Judge Jane Roth dissented, describing the products as sports wagers within a traditional area of state police power.¹²

The Ninth Circuit rejected that route in August. In KalshiEX, LLC v. Assad, a unanimous panel upheld the dissolution of preliminary protection against Nevada for sports contracts. It concluded that Kalshi had not shown the bets were swaps and relied on the current text of § 40.11. The panel rejected express, field, and conflict preemption on the record before it. It handled product categories separately, affirming as to sports while remanding the election-contract issue.¹³

The disagreement reaches two antecedent questions. The first is whether a sports event contract qualifies as a swap within the CFTC’s exclusive jurisdiction. The second is what follows when a DCM self-certifies that contract while a regulation says a registered entity shall not list a gaming contract. The Third Circuit treated the federal market structure and CFTC inaction as support for preemption. The Ninth Circuit treated the product’s function and the regulation’s unamended text as reasons to deny it. Neither decision is a final nationwide merits judgment, and neither binds a federal court in New York’s Second Circuit.

The cases also warn against deciding “prediction markets” as one undifferentiated product. The Ninth Circuit separated sports and election contracts. Polymarket’s own filings specify the underlying, settlement value, data source, and other terms for each contract class.⁶ Those details determine whether a contract fits a statutory category, relates to gaming under the regulation, or conflicts with a particular state rule. A weather contract, a governor-count contract, and a point-spread contract may share an exchange while presenting different classification questions.

The unresolved question changes with the contract

New York’s new case cannot be resolved from the CFTC registry alone. The registry proves that Polymarket US is a designated exchange. The amended order proves that federal obligations continue. A self-certification proves what the exchange represented about one product class. None is a CFTC order deciding that New York’s gambling definitions are preempted for every contract and every customer.⁴⁵⁶

New York faces a matching burden. Calling the product gambling under state definitions does not answer whether the Commodity Exchange Act places a given transaction within exclusive federal jurisdiction. Nor does the state’s traditional authority over gambling erase a conflict if enforcing one of its rules would regulate DCM trading that Congress assigned to the CFTC. The two appellate opinions show that both sides can state a serious argument and still disagree at the first classification step.¹²¹³

A court will have to analyze each state claim as applied to each product. It can ask whether a particular contract is a swap, whether § 40.11 covers it, whether the CFTC issued a product-specific order, and whether New York’s challenged rule controls trading or enforces a separate business duty. It can then ask which users and transactions the requested remedy would reach. Until those questions are answered, Polymarket’s designation and New York’s gambling definition describe competing sources of authority. The judgment will have to specify which federal act displaces which state rule, for which contract and which customer.