The New York City Council has initiated an inquiry into the marketing strategies of prediction market platforms such as Kalshi, Polymarket, Coinbase, and Gemini Titan. This investigation arises from concerns regarding potentially misleading practices and the targeting of younger demographics.
Council Speaker Julie Menin has sent out letters to these four companies, requesting details about their marketing approaches and their reach within New York City. The letters include over 60 inquiries, focusing on the revenue generated in the city, the number of users from the area, and adherence to consumer protection regulations.
Menin emphasized, “Prediction markets aggressively entice consumers to bet on various topics including sports, politics, culture, and even weather.” She expressed a commitment to safeguarding New Yorkers, particularly the youth, from becoming victims of deceptive marketing practices.
The investigation will assess whether these platforms have engaged in false or abusive marketing tactics, especially concerning minors and individuals prone to compulsive gambling.
Additionally, the Council is contemplating the need for further legislation, enforcement actions, public awareness campaigns, health initiatives, or funding to mitigate potential risks linked to this sector. Public hearings are set to be part of the investigation process.
The inquiry also addresses allegations against Polymarket regarding influencer marketing, including undisclosed promotions and misleading videos that mimic actual trades on fake websites. A report from the Wall Street Journal indicated that 70% of the videos produced by Polymarket creators featured these dummy sites.
In response, Polymarket stated that it is eager to collaborate with the City Council, while a representative from Coinbase affirmed the company’s compliance with applicable laws.
Although the Council lacks the authority to file criminal charges, it can issue subpoenas to compel companies to provide documentation.
Council Member Harvey Epstein, who chairs the Committee on Consumer and Worker Protection, noted the rising popularity of online prediction markets, with projections estimating $300 billion in volume this year. He stressed the importance of investigating the claims and advertising methods employed by these companies to ensure legal compliance.
This investigation follows a lawsuit filed by New York Attorney General Letitia James against Kalshi, claiming that the company operates an illegal gambling application. Kalshi and other prediction market operators argue that their services differ from traditional sports betting, as users trade against each other rather than against the house.
The Commodity Futures Trading Commission (CFTC), which asserts its authority over national derivatives markets, has contested James' lawsuit. A CFTC spokesperson stated, “The New York State Attorney General does not set the rules for national derivatives markets; that’s the role of the CFTC.”
Kalshi has previously offered New York authorities a share of its trading revenue through taxation and proposed allowing users to opt out of its app, as reported by the Wall Street Journal.
In response to the scrutiny, Polymarket has begun restructuring its marketing operations, including the hiring of Bird founder Travis VanderZanden as its new head of growth.
Deputy Speaker Dr. Nantasha Williams emphasized the need for the Council to investigate the potential dangers associated with prediction markets, particularly those affecting young individuals and compulsive gamblers.