Key Takeaways:
The New York City Council opened an investigation into the marketing practices of four prediction market platforms, including Polymarket and Kalshi, over allegations of deceptive advertising aimed at young traders.
"Prediction markets aggressively entice consumers to bet and wager on sports, politics, culture, weather, and pretty much anything," Julie Menin, Council Speaker, said in a statement. "I intend to harness the full power of the Council to protect New Yorkers from deceptive and predatory marketing practices by prediction market platforms."
Menin sent letters dated Aug 11 to Polymarket, Kalshi, Coinbase and Gemini Titan asking each to detail their marketing operations, her office said. The letters reference a Wall Street Journal investigation that claimed Polymarket made it appear content creators it partnered with were winning on the platform when they were not using their own money. That reporting led to a probe by the Commodity Futures Trading Commission, the federal regulator for prediction markets.
The letter to Polymarket CEO Shayne Coplan asks the company to answer more than two dozen questions about its business and marketing, provide a list of its 50 highest-compensated content creators and hand over contracts and communications with those creators. The council has requested a response within 14 business days.
The council's memo said the inquiry is not exploring whether event contract exchanges violate New York's state gambling laws. New York Attorney General Letitia James is separately suing Kalshi, Coinbase and Gemini, alleging the companies run illegal gambling operations. The platforms assert they are federally regulated financial exchanges and not subject to state betting laws. New York is not in litigation against Polymarket.
Kalshi, Polymarket and Gemini are all headquartered in New York City. Coinbase operates out of Texas but announced plans to expand its New York workforce to more than 1,000 employees.
Polymarket said it looks forward to engaging with the council. Coinbase said it offers customers access to federally regulated prediction markets overseen by the CFTC and fully complies with applicable laws. Kalshi and Gemini did not respond to requests for comment.
The probe adds another layer of regulatory pressure on a sector that has expanded rapidly, drawing a large base of traders wagering on politics, sports and entertainment. The CFTC earlier this year sued New York, accusing the state of encroaching on federal authority by pursuing prediction-market companies under gambling laws. The council plans to hold a hearing on the matter, and its findings could inform legislation or other policy changes.
This article is for informational purposes only and does not constitute investment advice.
