Polymarket's chief legal officer warned of federal preemption before lawsuit

Polymarket chief legal officer flagged federal preemption before suit was filed

Neal Kumar said his team had tried to negotiate with New York state officials before either lawsuit landed in court. That detail, disclosed by Polymarket's chief legal officer after Thursday's filings, is the one the headline writers mostly skipped — and it matters more than the filing count.

By the time Governor Hochul and Attorney General James filed in Manhattan state court, Polymarket had already prepared its federal answer. The counter-suit, filed the same afternoon in federal court, rests on a single claim: the CFTC holds exclusive jurisdiction over event contracts, and New York's gambling statutes cannot reach what a federal regulator already covers. Kumar called the state's action "an extraordinary assertion of state power squarely foreclosed by federal law."

That framing is deliberate and worth taking seriously on its own terms. The CFTC under Chair Michael Selig has said publicly that the agency has exclusive jurisdiction over these products. What the agency has not done is intervene directly in any of the state proceedings against prediction market operators. That gap between a stated position and an enforcement posture is where Polymarket is currently living, and it is not a comfortable place to be.

New York's case rests on three pillars. First, the contracts are gambling under state law because outcomes are uncertain and outside the bettor's control. Second, Polymarket has no New York State Gaming Commission license. Third, the platform accepts users between eighteen and twenty, while state law requires twenty-one for mobile sports betting. The age argument is the sharpest of the three in political terms — it is the one that resonates with legislators who have never followed a futures debate in their lives.

The state is seeking an injunction, forfeiture of alleged illegal gains, consumer restitution, and fines at three times the gains. That triple-damages ask is a negotiating position as much as it is a legal remedy. I have watched enough of these enforcement actions to know that the number in the complaint and the number in the eventual settlement — if there is one — rarely share more than a digit.

What concerns me about Polymarket's position is not the legal theory. The preemption argument is coherent and has survived scrutiny in other contexts. The problem is timing. New Jersey has already petitioned the Supreme Court to hear its case against Kalshi, and the Court has not yet said whether it will take the matter up. Until there is a definitive ruling on federal preemption, every state that wants to file has an open lane. New York, New Jersey, Massachusetts, Missouri — the filing cadence has been roughly one new action per month, and each one extracts legal costs and management attention that compound regardless of outcome.

Polymarket's December 2025 US launch gave it less than ten months before its first major state lawsuit. The sports contract product, specifically the mobile app advertising to New York residents, handed the AG's office the cleanest possible hook. A federal derivatives exchange operating under CFTC oversight is one argument. A mobile app with sports bets advertised to eighteen-year-olds in a state that prohibits that is a different argument, and it is the one New York chose to make.