The Gambling Wire: New York, Polymarket Trade Lawsuits as Prediction Market Fight Grows

New York’s legal battle with prediction markets expanded to Polymarket. Meanwhile, Kalshi reportedly geofenced California Tribal lands and Massachusetts will examine DraftKings’ use of AI.

New York has turned its attention to Polymarket, filing an illegal gambling lawsuit months after launching a similar challenge against Kalshi. The prediction market operator responded with a lawsuit against the state.

The developments lead a busy regulatory and legal news cycle that also includes California Tribal litigation, an NCAA setback in Indiana and an unusual potential M&A reversal involving MGM Resorts.

The Big Story: New York Sues Polymarket, Polymarket Sues the State

New York has sued Polymarket over its event contracts, marking the latest development in the state’s fight with prediction markets.

As in New York’s July lawsuit against Kalshi, the new complaint alleges Polymarket operates an illegal gambling business without a New York gaming license. New York is seeking an injunction, restitution, disgorgement and penalties, including $100,000 for each alleged unauthorized offer or attempted offer of sports wagering.

The state also argues Polymarket permits users ages 18 to 20, while New York requires mobile sports bettors to be at least 21.

As has been the case for previous state lawsuits, Polymarket responded by removing the case from state court to the Southern District of New York.

The company argues federal jurisdiction exists because New York alleges a Wire Act violation and because the dispute raises questions about the Commodity Exchange Act (CEA) and the Commodity Futures Trading Commission’s (CFTC) authority over event contracts.

The company also separately sued New York gaming officials. Polymarket seeks declaratory and injunctive relief to prevent enforcement of state gambling laws against its federally regulated exchange. Polymarket argues that the CEA gives the CFTC exclusive jurisdiction over its event contracts.

That argument has already faced resistance in the same federal district. In July, a federal judge denied Kalshi’s request for a preliminary injunction. U.S. District Judge Analisa Torres found that Kalshi had not shown that New York’s gambling laws are preempted by the CEA as applied to its sports event contracts. Kalshi has appealed the ruling.

New York has also sued Coinbase and Gemini, while the CFTC has separately sued the state.

The Daily Wire

Kalshi Geofences California Tribes Amid Blue Lake Case

Kalshi has reportedly implemented new geofencing around three California tribes amid its ongoing litigation over sports event contracts on tribal lands.

Analyst Mick Bransfield said on X that Kalshi attorney Grant Mainland told the court the company had geofenced around the three California tribes involved in the litigation. According to Bransfield, an attorney for the tribes responded that the measure does not change their claim of irreparable harm.

The hearing came a week after the Ninth Circuit ruled that the tribes are likely to succeed on their claim that Kalshi’s sports-event contracts constitute Class III gaming under the Indian Gaming Regulatory Act (IGRA) when entered into on tribal lands.

The appeals court reversed the district court’s dismissal of the IGRA claim and remanded the case for consideration of the remaining preliminary-injunction factors.

Indiana Rejects NCAA College Player Prop Ban

The Indiana Gaming Commission rejected the NCAA’s request to ban all college player prop betting at licensed sportsbooks on Thursday. Commissioners questioned whether lawmakers should instead address the issue.

In a January letter, NCAA President Charlie Baker argued that player prop bets create integrity risks and contribute to harassment of student-athletes. Commissioners acknowledged those concerns but questioned whether a blanket regulatory ban was the appropriate response.

Indiana follows Missouri, where regulators also declined to prohibit the bets earlier this year. Missouri regulators cited the market’s recent launch and insufficient data as the reasons.

States that have previously adhered to the NCAA’s request include Ohio, Louisiana, Maryland and Vermont. Legislation in New York, New Jersey and Massachusetts failed to advance earlier this year.

Senate Democrats Seek Prediction Market Hearing

All 11 Democrats on the Senate Banking Committee have asked Chair Tim Scott to hold a public hearing on prediction markets following a Republican-only roundtable with Kalshi CEO Tarek Mansour.

The lawmakers argued that the committee has an oversight role as prediction markets expand into securities-linked products. In a Sept. 23 letter, they said event contracts tied to corporate performance indicators “could meet the definition of security-based swaps” subject to SEC regulation.

The senators also raised concerns about market manipulation, insider trading and consumer losses. They called for Congress to examine the sector “on a bipartisan basis in a public hearing – not behind closed doors in a Republican-only, industry-friendly roundtable.”

Scott has said the Republican meeting with Kalshi covered securities-linked products, investor protections and regulatory questions Congress may need to address.

Massachusetts to Examine Sportsbooks’ Use of AI

The Massachusetts Gaming Commission (MGC) will examine how licensed sportsbooks use artificial intelligence and machine learning following a New York Times investigation into DraftKings.

MGC Chair Jordan Maynard said staff will engage with DraftKings to understand the practices described in the report before the commission considers whether further action is warranted. The review will also examine AI practices among other licensed operators.

The commission has already been examining AI’s role in gambling. A study commissioned by the MGC and released last year identified a potential regulatory “governance gap,” prompting the creation of an AI task force.

MGM Reportedly Considers People Inc. Bid

MGM Resorts could turn the tables on Barry Diller’s People Inc. just one day after the media company abandoned its pursuit of the casino operator. The gaming giant is discussing a potential bid to acquire People Inc., according to the Wall Street Journal. The talks remain preliminary, and MGM could ultimately decide not to proceed.

People Inc. withdrew its proposal to acquire MGM on Wednesday after previously seeking to purchase the casino operator’s outstanding public shares in an $18 billion deal. The company, formerly known as IAC, already owns a 27% stake in MGM. Its portfolio includes media brands such as People and Food & Wine.

Iowa Athletes Take Sports Betting Search Case to Eighth Circuit

A group of current and former Iowa college athletes has asked the Eighth Circuit to revive a lawsuit challenging investigators’ warrantless use of geolocation data to identify potential sports betting violations.

A federal judge previously found the warrantless search violated the athletes’ Fourth Amendment rights but still dismissed the case. The judge ruled that the investigators were protected by qualified immunity.

At Thursday’s hearing, the athletes argued that existing Supreme Court precedent already established protections for historical digital location data. Iowa defended the dismissal and questioned whether athletes using other people’s sportsbook accounts had a reasonable expectation of privacy.

Prediction Markets Weekly Roundup

Prediction markets faced fresh scrutiny from regulators, lawmakers and the gambling industry this week.

The CFTC warned that “mention markets” carry heightened risks of manipulation. Chair Michael Selig later told CNBC the agency had “a lot of concern with these markets,” while declining to say whether it is investigating potential wash trading in Kalshi’s cryptocurrency markets.

Earlier in the week, a quantitative analyst flagged $539 million in 24-hour Ethereum volume against just $3.1 million in open interest. The company said the activity was legitimate.

State and industry pressure also grew. Missouri issued cease-and-desist letters to Kalshi, Polymarket, Crypto.com, Novig, Underdog and Robinhood over sports event contracts, while Mexico’s soccer federation sued Kalshi over its use of Liga MX trademarks.

The National Council on Problem Gambling, meanwhile, toughened its stance following criticism of its partnership with Kalshi. The organization warned that prediction markets are causing real financial and emotional harm and called for stronger consumer protections.

In Washington, Utah Sen. John Curtis called for an investigation into Donald Trump Jr.’s prediction-market ties.

Legal battles continued. Kalshi asked the Seventh Circuit to hear key IGRA questions in the Ho-Chunk Nation case, with the court ordering the Tribe to respond by Oct. 8. Tennessee cited the Ninth Circuit’s recent Tribal ruling as supplemental authority in separate litigation.

Meanwhile, NCLGS urged the Supreme Court to hear New Jersey’s appeal challenging the Third Circuit’s Kalshi ruling, while Kalshi received a 30-day extension to respond.

On the commercial side, Kalshi partnered with Public to offer event contracts and integrate prediction-market data into its AI agents. DKeX is ending certain market-maker incentives for Combination Contracts after liquidity reached its targets. Meanwhile, OG.com sought CFTC approval to launch perpetual security futures on individual stocks, expanding beyond event contracts.

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