NYC Opens ‘Predatory’ Ad Probe Into Prediction Markets; Accuses Kalshi, Coinbase and Gemini of Illegal Gambling

New York is putting prediction markets under pressure on two fronts, with the City Council investigating allegedly predatory advertising while the state attorney general is suing Kalshi, Coinbase and Gemini over claims that their platforms are illegal gambling operations.

The city inquiry targets Kalshi, Polymarket, Coinbase and Gemini Titan and focuses on how they market event contracts to New Yorkers, including young adults and potentially minors. The separate state cases concern whether the contracts themselves amount to unlicensed gambling under New York law.

The Council’s investigation cites allegations of fake trades, simulated winning bets and undisclosed influencer marketing. A Wall Street Journal review found that none of roughly $1.9 million in wagers shown across 1,105 promotional videos from 10 creators were real.

Fake Bets Put Marketing Under Scrutiny

The Journal found that about 70% of the 1,105 videos showed a bet being placed. All of the wagers, worth about $1.9 million in total, were simulated on websites made to resemble Polymarket, according to the newspaper’s review.

In 118 videos, creators appeared to celebrate nearly $900,000 in winnings. The Journal said those bets would actually have lost more than $166,000 had they been real.

The Council’s inquiry cites similar allegations, including videos depicting nonexistent trades, fictitious profitable wagers that would have produced losses and the promotion of insider trading. It is also examining whether paid influencer relationships were disclosed.

Speaker Julie Menin said the Council has been examining the industry’s practices for months.

“Prediction markets aggressively entice consumers to bet and wager on sports, politics, culture, weather, and pretty much anything,” Menin said. “We refuse to let New Yorkers, especially our young people, become collateral damage.”

City Inquiry Focuses On Consumer Protection

Menin’s letters to the four platforms seek information about their marketing campaigns, influencer relationships, New York users and the safeguards they use for younger customers. The companies were given 14 business days to respond.

The Council said it wants to determine whether existing consumer-protection laws are sufficient and whether new legislation, enforcement measures, public education or health programs are needed.

The inquiry is separate from the state’s gambling cases.

The Council said key marketing restrictions and consumer protections that apply to casinos and online sports betting do not currently apply to prediction markets. That gap is part of its examination of whether additional rules are necessary.

New York Is Already Suing Three Platforms

New York Attorney General Letitia James sued Coinbase Financial Markets and Gemini Titan in April, alleging they were operating unlicensed gambling businesses through prediction-market products covering sports, entertainment and elections. Her office said the platforms exposed New Yorkers under 21 to gambling despite the state’s legal age for mobile sports betting being 21.

The state sued Kalshi separately on July 31, alleging that it was operating an illegal gambling platform without a New York gaming license. The state is seeking at least $36 billion in damages from Kalshi, according to court filings reported by The Block.

Kalshi has argued that its event contracts are financial products regulated federally by the Commodity Futures Trading Commission rather than gambling products governed by New York law. Reuters reported that New York’s case against Kalshi is part of the state’s broader effort to apply its gambling rules to prediction markets.

The City Council inquiry does not determine that question.

Its focus is the companies’ advertising and consumer-protection practices, while the state litigation is testing whether the underlying prediction-market products can legally operate in New York.

Platforms Push Back

Polymarket said it would cooperate with the Council’s inquiry. Coinbase has said its prediction-market products are federally regulated by the CFTC and that it complies with applicable laws.

Kalshi also said it looked forward to explaining its business model and practices to the Council, while Gemini did not immediately provide a detailed response in initial reporting.

The Council’s investigation includes all four platforms, but the state gambling litigation currently involves Kalshi, Coinbase and Gemini. Polymarket is not a defendant in the New York gambling cases described above.

Council Seeks Answers From Four Platforms

The investigation gives the City Council a separate route to examine an industry that has expanded rapidly across sports, elections, politics, weather and other events.

Council Member Harvey Epstein, chairman of the Committee on Consumer and Worker Protection, said lawmakers needed to examine the claims made in prediction-market advertising.

“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,” Epstein said.

The four companies have 14 business days to provide information requested by the Council. The Council said it plans a public hearing and will use the responses to decide whether additional consumer protections or other measures are warranted.