Polymarket and several other prediction market platforms are in hot water again in New York City, this time over their fishiy marketing practices.
The New York City Council announced Wednesday that it has opened an investigation into major prediction market exchanges, focusing on their advertising in the city and potentially false, deceptive, or abusive tactics, particularly those targeting young people.
Council Speaker Julie Menin sent letters to Kalshi, Polymarket, Coinbase, and Gemini Titan requesting information about their marketing strategies. The Council is also planning a hearing on the issue.
“Prediction markets aggressively entice consumers to bet and wager on sports, politics, culture, weather, and pretty much anything. We refuse to let New Yorkers, especially our young people, become collateral damage,” said Menin in a press release. “I intend to harness the full power of the Council to protect New Yorkers from deceptive and predatory marketing practices by prediction market platforms.”
Prediction markets have exploded in popularity in recent years, especially around elections and sports. They let users essentially bet on real-world events by buying and selling contracts that pay out if a certain outcome happens.
The Council said the investigation is meant to determine whether new consumer protection legislation, enforcement, public education campaigns, or health measures are needed to protect New Yorkers.
Use of media influencers scrutinized
A major focus of the probe is Polymarket’s use of social media influencers.
The Council cited a June investigation by The Wall Street Journal, which examined more than 1,100 videos from creators tied to Polymarket.
The Journal found that in 70% of the videos, creators appeared to place bets on Polymarket, but clues indicated the trades were fake.
Polymarket told the newspaper at the time that it plans to audit its promotional content.
Major media institutions are also partnering with these marketplaces, lending them additional credibility. CNN teamed up with Kalshi last year, while the Golden Globes partnered with Polymarket earlier this year. The Associated Press also annoucned this year that it will provide Kalshi with data and race calls for national and state elections.
Prediction market controversies invite pushback
Still, the platforms have not been without controversy. Kalshi and Polymarket have rules restricting insider trading; however, U.S. lawmakers have introduced a bill that would ban trades on these platforms tied to outcomes that can be manipulated, following high-profile cases of users making large profits on suspiciously timed trades tied to global conflicts.
More recently, new markets on drug trials and flight cancellations have drawn scrutiny over insider trading concerns and fears they could encourage people to interfere with the clinical trials or intentionally try to get flights cancelled.
The industry is also fighting with state regulators over whether prediction markets facilitate gambling.
New York Gov. Kathy Hochul and Attorney General Letitia James announced on July 31 that the state was suing Kalshi for allegedly operating an illegal gambling business. The state has also filed lawsuits against Coinbase and Gemini Titan.
This week, however, the U.S. Commodity Futures Trading Commission (CFTC) used its emergency authority and ordered Kalshi to continue to operate in the state.
Polymarket, Kalshi, Coinbase, and Gemini Titan did not immediately respond to requests for comment.
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