New York City probes prediction market platforms over deceptive ads
New York City regulators are investigating major prediction market platforms for deceptive marketing, adding local consumer protection scrutiny to a mounting federal-state legal clash over the sector's future.
The New York City Council has opened a formal investigation into Kalshi, Polymarket, Coinbase, and Gemini Titan over allegations of deceptive marketing targeting younger consumers. The probe centers on "false, deceptive, or abusive marketing tactics," adding a new layer of local scrutiny to a prediction market sector that has rapidly expanded to be valued at billions of dollars.
At the core of the council's inquiry are claims that Polymarket paid social media creators to produce videos of themselves placing fake bets and winning on replica versions of the platform. Polymarket said it looked forward to "engaging with The New York City Council." Following the reports, the platform is reportedly restructuring its marketing team and hiring a third-party consulting firm to oversee content from its promotional partners.
Kalshi, Coinbase, and Gemini Titan did not immediately respond to requests for comment. For market participants, the local investigation signals that regulatory risk is broadening beyond traditional jurisdictional disputes into strict consumer protection enforcement.
This local pressure compounds a severe legal confrontation at the state level. Last month, New York Attorney General Letitia James sued Kalshi, alleging it operates an illegal gambling business. She is seeking a temporary restraining order, user restitution, and civil penalties that could reach at least $36 billion.
The state lawsuit prompted immediate federal pushback. On Tuesday, the Commodity Futures Trading Commission used its emergency authority to order Kalshi to maintain its operations. The federal regulator argues it has "exclusive jurisdiction" over prediction markets, including sports-related contracts, and has initiated litigation against several states to assert its regulatory supremacy.
The expanding oversight reflects deepening concerns about the fundamental nature of prediction markets. State officials argue that sports-related contracts effectively constitute unauthorized gambling. Furthermore, the potential for insider trading has drawn official warnings, leading Governor Kathy Hochul to sign an executive order in April prohibiting state employees from using confidential government information to place bets.
The City Council's actions could ultimately result in tailored local legislation. "With the industry aggressively marketing to New Yorkers, we have a responsibility to investigate their claims and the advertising tactics these companies are using to ensure they are following the law," council member Harvey Epstein said.
