SDNY U.S. Attorney: 'Prediction Market' Label Provides No Insulation From Prosecution'

Written by :

Gilbert Horowitz

Published on :

12 February, 2026

Polymarket has been hit with a second class action lawsuit in the Southern District of New York (SDNY) for operating an "unlicensed sports betting enterprise", for which the plaintiff alleges is marketed as a "prediction market to hide the fact that the platform provides for and facilitates illegal sports gambling."

NEW: Polymarket hit with a second class action lawsuit in the SDNY for operating an "unlicensed sports betting enterprise" which plaintiff alleges is marketed as a "prediction market to hide the fact that the platform provides for and facilitates illegal sports gambling." pic.twitter.com/aG8wrSZv3y
— Daniel Wallach (@WALLACHLEGAL) February 11, 2026

The SDNY U.S. Attorney has made it clear his office is honing in on prediction markets.

From JD Supra:

The enforcement landscape is shifting rapidly. On February 5, 2026, the U.S. Attorney for the Southern District of New York Jay Clayton made clear that his office is focused on the prediction markets and that the “prediction market” label provides no insulation from prosecution. When asked whether participants in these markets were effectively beyond the reach of fraud statutes, Clayton responded bluntly: “No.” He added that prediction markets are “an area that I am looking at” and, when pressed on whether he expects enforcement actions, answered: “Yes.”
U.S. Attorney Clayton also signaled a new emphasis on corporate cooperation in this space. His office intends to offer swift, conditional non-prosecution agreements (NPAs) that require continued cooperation, with the explicit goal of “root[ing] out wrongdoers” inside companies. As he put it, the approach is: “let’s get an NPA signed as quickly as possible that calls for continued cooperation.”

Polymarket has worked to become a legally compliant platform in the U.S. After being effectively barred from the U.S. market following a 2022 settlement with the Commodity Futures Trading Commission (CFTC) for operating without proper registration, the company took significant steps to re-enter the U.S. market. Its acquisition of QCX LLC, a CFTC-licensed derivatives exchange enables Polymarket to operate in the U.S. under CFTC oversight and the company received regulatory approval late last year to trade in the U.S.