Polymarket Under Fire: New York Lawsuit Accuses Prediction Market of Illegal Sports Gambling

In a dramatic twist that has sent shockwaves through the crypto and prediction market communities, Polymarket—a platform once celebrated for its innovative approach to forecasting real-world events—is now facing a major legal battle in New York. A proposed class action lawsuit has been filed in federal court, accusing the platform of operating an illegal online sports gambling operation disguised as a legitimate “prediction market.”

The lawsuit, filed on February 4 in the U.S. District Court for the Southern District of New York, was brought by Lorenzo Miro San Diego, who claims to be acting on behalf of himself and a proposed class of similarly situated users. The defendants named in the case include Blockratize, Inc. (doing business as Polymarket), Adventure One QSS, Inc. (doing business as Polymarket.com), and QCX LLC (doing business as Polymarket US).

The Core Allegations: Prediction Market or Sportsbook?

At the heart of the lawsuit is a bold claim: Polymarket is not the innovative prediction market it purports to be. Instead, the complaint alleges that the platform is a deceptive sports betting operation that operates without the necessary licenses required under state law.

The lawsuit argues that while Polymarket markets itself as a platform for trading “prediction contracts” on the outcomes of real-world events, its mechanics and purpose are indistinguishable from traditional sports betting. Users are allegedly wagering on the outcomes of sporting events and other real-world occurrences, which the complaint classifies as illegal gambling.

“Polymarket is marketed as a ‘prediction market,’ but in reality, it is an unlicensed sports betting enterprise prohibited under various state laws,” the lawsuit states. The plaintiff contends that the platform’s presentation to users masks its true nature, making it appear lawful when it is, in fact, operating in violation of state gambling regulations.

A Growing Legal Storm

This New York lawsuit is just the latest in a series of legal challenges facing Polymarket. In Nevada, the platform recently faced a temporary restraining order issued by a state court after regulators argued that it was offering unlawful sports wagering to residents. The order sought to block Polymarket from continuing operations in the state while the dispute is resolved.

The Nevada action reflects a broader trend of increased scrutiny of online prediction markets, particularly those tied to sports outcomes. Regulators in Nevada argued that simply labeling products as “prediction markets” does not change their fundamental nature as sports betting under state law.

The Legal Strategy: Class Action and Jury Trial

San Diego is seeking to have the case certified as a class action, which would allow other users of the platform to join the lawsuit. He has also requested a jury trial, signaling his intent to pursue the case aggressively. While the filing does not specify the amount of damages sought, it seeks relief for San Diego and the proposed class of users.

The lawsuit is based on an investigation by San Diego’s attorneys, along with information and belief. Any allegations tied directly to his own use of the platform are based on his personal knowledge.

Polymarket’s Response and Industry Implications

As of the filing date, no response from the defendants had appeared on the court’s docket. ReadWrite has reached out to Polymarket for comment, but the company has not yet responded publicly to the allegations.

The outcome of this lawsuit could have significant implications for the prediction market industry, which has grown in popularity in recent years. If the court rules against Polymarket, it could set a precedent for how other prediction markets are regulated and operated in the United States.

The Bigger Picture: Regulation and Innovation

The case against Polymarket highlights the ongoing tension between innovation and regulation in the digital age. Prediction markets, which allow users to bet on the outcomes of real-world events, have been praised for their potential to aggregate information and provide insights into future events. However, they also raise complex legal and regulatory questions, particularly when they involve sports betting.

As the lawsuit unfolds, it will be closely watched by industry participants, regulators, and legal experts alike. The outcome could shape the future of prediction markets and their place in the broader landscape of online gambling and financial innovation.

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