New York City lawmakers are escalating scrutiny of the rapidly expanding prediction market industry, opening an investigation into whether platforms including Polymarket, Kalshi, Coinbase and Gemini Titan have used deceptive or predatory marketing tactics to encourage consumers to wager on event contracts.
The New York City Council is examining allegations of “false, deceptive, unconscionable, and objectionable marketing practices” by prediction market platforms, the office of Council Speaker Julie Menin said Wednesday.
In letters sent to the four companies, Menin said the Council had been examining the platforms’ marketing practices for several months and intends to determine whether existing consumer protection measures are sufficient to address the industry’s growth.
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“Prediction markets aggressively entice consumers to bet and wager on sports, politics, culture, weather, and pretty much anything,” Menin said. “I intend to harness the full power of the Council to protect New Yorkers from deceptive and predatory marketing practices by prediction market platforms.”
The inquiry adds a new layer to an already intensifying regulatory battle surrounding prediction markets in New York. While state authorities are separately challenging the legality of event contracts offered by several of the companies, the City Council’s investigation is focused specifically on how the platforms market their products to consumers.
Menin’s letters cited a Wall Street Journal investigation into Polymarket’s marketing campaigns. The Journal reported in June that some content creators working with the platform appeared to be presented as successful traders even though they were not using their own money to place the bets.
The report prompted scrutiny from the Commodity Futures Trading Commission, the federal regulator that oversees U.S. derivatives markets and has jurisdiction over federally regulated prediction contracts.
Polymarket has since begun changing aspects of its marketing operation. CNBC reported Tuesday that the company had introduced updated and streamlined guidelines governing its employees and the content creators with whom it works.
The City Council is now examining whether similar practices exist across the broader prediction market industry rather than treating the allegations involving Polymarket as an isolated case.
A memo attached to Menin’s letters said the allegations point to an urgent need to determine whether new legislation or other policy measures are required. The Council also plans to hold a hearing as part of the investigation. The inquiry does not address a separate and potentially more consequential question: whether prediction markets themselves constitute illegal gambling under New York law.
That issue is already being litigated at the state level.
New York state is suing Kalshi, Coinbase and Gemini, arguing that the companies are operating illegal gambling businesses. The platforms dispute that characterization, maintaining that their event contracts are financial products offered through federally regulated exchanges and therefore fall under federal rather than state oversight.
Polymarket is not currently a defendant in that litigation.
The distinction between the city investigation and the state lawsuits could become important for the industry. The Council is examining consumer-facing conduct, including advertising and promotional practices, while the state litigation centers on the legal classification of prediction markets and the authority of federal and state regulators over them.
Prediction markets have expanded rapidly by allowing users to buy and sell contracts tied to the outcomes of events ranging from elections and sporting contests to economic indicators and weather. Their growing popularity has attracted both financial-market participants and retail users, while also increasing scrutiny over whether the products resemble conventional financial derivatives, sports betting, or a hybrid of the two.
Marketing has consequently become a central regulatory concern. As platforms compete for users, promotions and partnerships with online creators can bring prediction markets to audiences that may not traditionally view themselves as participants in financial markets or betting activities.
The Council’s investigation could therefore have implications beyond the four companies named in the letters. If lawmakers conclude that existing advertising rules do not adequately cover prediction markets, the city could consider additional consumer-protection measures governing how platforms promote contracts, disclose risks and portray potential returns.
The companies also have a significant local presence. Kalshi, Polymarket and Gemini are headquartered in New York City. Coinbase is headquartered in Texas but said earlier this year that it planned to expand its workforce in New York to more than 1,000 employees.
Polymarket said it welcomed engagement with the Council.
“We look forward to engaging with The New York City Council on this matter,” a company spokesperson said.
A Coinbase spokesperson said the exchange offers customers access to federally regulated prediction markets overseen by the CFTC and “fully complies with applicable laws.”
The investigation comes as prediction markets face a broader test over where financial-market regulation ends and gambling and consumer-protection law begins. The outcome of New York’s legal and regulatory scrutiny could help shape how these platforms operate in one of the largest U.S. consumer markets, particularly as their products become more mainstream and their marketing reaches a wider audience.