New York City Council is investigating Polymarket, Kalshi, and other predictive market platforms for “deceptive and predatory” marketing practices, accusing the industry of encouraging gambling and insider trading.
Council Speaker Julie Menin notified Kalshi, Polymarket, Coinbase, and Gemini Titan of the investigation on Tuesday. In a letter to Polymarket seen by Bloomberg, Menin referenced “troubling” news reports suggesting that the company and its competitors “target young adults – and thus potentially minors – with false, deceptive, and unconscionable advertising.”
According to the reports, Polymarket allegedly paid influencers to promote its platform without disclosure, produced videos showing fake trades on its site, presented losing bets as winners, and encouraged insider trading.
“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,” Menin said in a statement on Wednesday.
Prediction markets have snowballed into a $240 billion-per-year industry, counting the annual trading volume of Kalshi, Polymarket, Coinbase, and Gemini Titan. By allowing customers to bet on politics and world events – for instance the likelihood that a world leader will be ousted by a certain date – they have reportedly become rife with insider trading.
A White House staffer has been investigated for allegedly making bets based on her advance knowledge of US President Donald Trump’s remarks, while a US special forces soldier has been arrested for using classified Pentagon materials to pocket $400,000 by correctly predicting the removal of Venezuelan President Nicolas Maduro from power in January.
Suspicious trades surged during the US-Israeli war on Iran, with The Guardian counting more than $1 billion in “perfectly timed” wagers, including an $850,000 bet just before US strikes on Iran began on February 28, and roughly $950 million in oil futures hours before US Trump announced a ceasefire. Suspicion fell on Washington insiders, and the White House warned staff against insider trading in April.
The federal government has defended prediction markets against state-level oversight, arguing that event contracts are financial instruments and therefore different from traditional gambling. After New York Attorney General Letitia James attempted to shut down Kalshi for violating state gambling laws in July, the US Commodity Futures Trading Commission (CTFC) stepped in this week and ordered the platform to remain operational in the state.
Responding to Menin’s letter, a spokesperson for Polymarket said that the company looks “forward to engaging with The New York City Council on this matter.”