Prediction Market Probe
New York City Council Probes Prediction Market Marketing Amid Deception Concerns and Regulatory Battle
Key Points
A Wall Street Journal analysis cited by the NYC Council found Polymarket’s marketing partners produced over 1,100 promotional videos; about 70% used simulated trading on a demo site to depict fabricated wins, with an estimated $1.9 million in simulated bets and roughly $900,000 in displayed winnings that would have been losses if real trades had occurred.
Polymarket said it would audit its promotional content in response to the WSJ findings, signaling an attempt to address concerns about misleading marketing.
The New York City Council gave the involved companies a 14-day window to respond to the inquiry's questions.
The Commodity Futures Trading Commission ordered Kalshi to continue operating in New York despite a parallel state effort to shut down its operations.
New York Attorney General Letitia James has sued Kalshi for illegal gambling operations, seeking $36 billion in civil penalties.
The New York City Council has launched a sweeping investigation into the marketing practices of four major prediction market platforms: Polymarket, Kalshi, Coinbase, and Gemini Titan. Council Speaker Julie Menin sent detailed letters to each company, demanding answers to more than 60 questions within 14 days, according to Fortune and CBS News.
The probe focuses on deceptive advertising, targeting of young users, influencer deals, and revenue generated in New York. It comes as prediction markets face mounting legal battles nationwide over whether they are gambling platforms or regulated financial products.
1,100 Promotional Videos Hid Fake Trades and Losses
A Wall Street Journal analysis cited by the Council found that Polymarket's marketing partners produced more than 1,100 promotional videos. About 70% of those videos used a demo site to show simulated trades — not real ones. Yahoo Finance reported that these clips displayed roughly $1.9 million in fake bets and about $900,000 in apparent winnings that would actually have been losses in real trading.
Polymarket said it would audit its promotional content after the Wall Street Journal published its findings. That response signals the company is trying to get ahead of the scrutiny. But the Council's inquiry suggests that similar deceptive tactics may exist across the broader industry.
NYC Council Targets Consumer Protection, Not Gambling Law
A Council memo makes clear that the investigation is not about whether these platforms break gambling laws. Instead, it focuses on consumer protection, gaps in enforcement, and what new policies may be needed, according to Crypto Times. The distinction matters because it gives the Council room to act even while federal and state courts fight over jurisdiction.
The letters ask companies to disclose user demographics, advertising budgets, influencer contracts, and how much revenue they earn from New York residents. The Council wants to know whether platforms specifically target young or financially vulnerable people.
Kalshi Caught Between State Lawsuit and Federal Order
Kalshi faces the sharpest legal pressure of any platform named in the probe. New York Attorney General Letitia James sued Kalshi for what she called illegal gambling operations, seeking $36 billion in civil penalties. That is one of the largest penalty demands ever sought against a prediction market platform, according to Fortune.
At the same time, the federal Commodity Futures Trading Commission ordered Kalshi to keep operating in New York, directly clashing with the state's effort to shut it down. The conflict highlights a core tension: states say prediction markets are gambling, while federal regulators treat them as derivatives — a type of financial contract they oversee.
States and Federal Regulators Clash Over Who's in Charge
The NYC Council probe is one piece of a much larger fight. States across the country are pushing to regulate or ban prediction markets, arguing they harm consumers. Federal agencies, particularly the CFTC, say these platforms fall under their authority as derivatives markets. That legal standoff has left consumers without clear protections, according to CBS News.
The BigGo Finance report noted that the Council's investigation could push New York to become the first major city to set its own consumer protection rules for prediction markets. With a 14-day response deadline in place, the companies named in the inquiry will soon have to answer publicly for their marketing practices.
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