New York City Council has launched an investigation into Kalshi, Polymarket, Coinbase and Gemini Titan over allegations that prediction-market companies used “false, deceptive, or abusive marketing tactics” to reach younger users, placing advertising practices at the center of an expanding fight over event-based trading.
The council sent letters to the four companies seeking information after reviewing allegations of predatory marketing in New York City for several months, according to a statement released Wednesday. Council Member Epstein said the inquiry could lead to consumer-protection legislation focused on how prediction-market platforms advertise and promote their products.
The move broadens the pressure facing the sector beyond the legal debate over sports contracts. State regulators have largely challenged prediction platforms on the grounds that certain event contracts resemble unlicensed gambling. The City Council’s inquiry instead focuses on the ways companies may attract customers, particularly through social media and potentially youth-oriented promotional content.
Polymarket is under particular scrutiny over allegations reported by The Wall Street Journal in June that it paid social-media creators to film staged bets and winnings on replica versions of its platform. The council said it would examine those claims as part of its review.
A Polymarket spokesperson said the company looked forward to engaging with the council. CNBC reported Tuesday that Polymarket had hired a third-party consulting company to oversee content created by promotional partners and had adopted a new structure for its marketing team. Kalshi, Coinbase and Gemini Titan did not immediately respond to requests for comment cited in the council material.
Marketing scrutiny reaches a fast-growing sector
Prediction markets allow users to buy and sell contracts tied to the outcome of real-world events, from elections and economic data to sports. Their marketing has increasingly blended financial-trading language with the visual style and creator partnerships commonly used by consumer apps, creating a fresh policy concern for local lawmakers.
The council’s letters reportedly seek detailed answers from company leaders, with Speaker Menin asking more than 60 questions. The requests focus on how the businesses promote their platforms online and what safeguards they use around younger audiences.
That approach could prove consequential even if courts ultimately settle the larger question of whether federal commodities law preempts state gambling rules. Advertising, consumer disclosures and youth protections are areas where city and state officials can attempt to impose obligations without directly deciding whether a particular event contract is lawful.
The inquiry also puts Coinbase and Gemini Titan alongside companies more closely identified with prediction markets. Their inclusion indicates that lawmakers are examining the distribution and promotion of event-based products, rather than limiting attention to the platforms that first built their businesses around them.
Kalshi faces New York lawsuit as federal regulator intervenes
The council action arrived one day after the Commodity Futures Trading Commission used emergency authority to permit Kalshi to continue operating while it fights a lawsuit filed by New York Attorney General Letitia James.
James sued Kalshi last month, alleging that the company operated an illegal gambling business in the state. The attorney general’s office is seeking a temporary restraining order that would halt Kalshi’s New York operations, restitution for users, disgorgement of profits and civil penalties. The complaint alleges potential penalties of at least $36 billion.
Kalshi’s legal position rests on its status as a federally regulated platform. The CFTC has argued that it holds “exclusive jurisdiction” over prediction markets, including sports-related contracts, and has brought lawsuits against several states as the regulator contests state efforts to enforce gaming laws against federally supervised venues.
The agency’s emergency action gives Kalshi temporary room to continue its New York business while the litigation proceeds. It does not resolve the underlying jurisdictional dispute, which places state consumer-protection and gambling authorities against the federal regulator responsible for commodities markets.
State officials have argued that sports-related contracts can operate like betting products regardless of the legal structure used to offer them. Prediction-market companies and the CFTC have countered that federally regulated event contracts fall within commodities oversight, rather than state gaming systems.
Insider-information concerns add to pressure
Marketing and gambling-law disputes are not the only issues attracting official attention. In April, New York Governor Kathy Hochul signed an executive order barring state employees from using confidential government information to place bets on prediction markets.
The order reflects a concern that employees with access to nonpublic policy, budgetary or regulatory information could gain an advantage in contracts tied to government decisions. Such risks are especially acute in markets involving election administration, economic releases, legislative outcomes or agency actions, where information can materially change a contract’s expected value before it becomes public.
The council’s investigation does not depend on proving insider trading or determining the legality of particular contracts. Its narrower focus is whether promotional techniques give consumers an inaccurate impression of the product, its risks or the authenticity of advertised wins.
Staged betting content can be especially sensitive because prediction markets often present themselves as places where informed judgment is rewarded. If promotional videos use simulated wagers or replica platforms without clear disclosure, users may mistake advertising for evidence of ordinary customer results.
A separate front in New York’s regulatory battle
New York’s actions now extend across several layers of government: the attorney general’s challenge to Kalshi’s operations, the governor’s restrictions on state employees, and the City Council’s review of platform marketing. Each addresses a different part of the prediction-market business model.
The Council’s eventual findings could shape local rules on disclosures, creator partnerships and the promotion of trading-like products to younger audiences. For the platforms, that adds a consumer-marketing compliance challenge while the more fundamental court battle over state and federal authority continues.
The immediate issue for the four companies is responding to the council’s requests. For New York policymakers, the inquiry offers a way to address consumer-facing conduct now, rather than waiting for courts to determine the final boundaries between commodities regulation and state gambling law.
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