NYC Council launching investigation into whether it can pass laws regulating how prediction markets Polymarket, Kalshi and others advertise in city
While the New York City Council cannot pass laws preventing prediction markets like Polymarket and Kalshi from operating in the city, the legislative body announced Wednesday that it was launching an investigation into whether and how it could regulate how those companies advertise themselves within the five boroughs.
City Council Speaker Julie Menin said the investigation will examine whether the prediction market platforms that allow people to place monetary wagers on sports games, elections, and other daily events are carrying out “false and deceptive” marketing practices, promoting insider trading or improperly targeting young people to place bets on their sites through undisclosed partnerships with social media influencers.
The launch of the investigation comes after reporting in June from The Wall Street Journal showed that Polymarket was using potentially questionable advertising tactics, like paying social media influencers $3,000 per month to post videos depicting non-existent trades on websites designed to appear similar to Polymarket and fictitious depiction of profitable wagers that actually would have generated losses.
Menin said the investigation, which does not have a specified timeline and takes aim at Polymarket, Kalshi, Coinbase and Gemini Titan, will help the legislative body understand how prevalent these practices are throughout the industry and what legislation the Council could pass to regulate them. Polymarket is the only prediction market so far that’s been accused of using such deceptive practices to date.
“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. “As a mother of four, I know firsthand the fears that come with raising kids in a world where predatory industries are constantly finding new ways to target them.”
Polymarket said it “looks forward to engaging with the New York City Council on this matter” in a statement. Coinbase said it “offers our customers access to federally regulated prediction markets overseen by the CFTC, and fully complies with applicable laws” in response to a question about the investigation.
What the Council’s prediction market probe aims to examine
The investigation looks into whether the city’s consumer protection laws are adequately protecting New Yorkers from false and deceptive marketing from prediction markets, whether the platforms are targeting people under 21 years old or acting “deliberately, recklessly or negligently” and to evaluate whether new laws need to be proposed or additional resources given to the city’s Department of Consumer and Worker Protection for law enforcement or education efforts to city residents about the risks posed by engaging with the platforms.
It also seeks to understand whether additional resources need to be given to address public health impacts associated with potential gambling addictions created by the platforms.
A questionnaire sent to Polymarket and other platforms specifically asks the companies to tell the Council how they attract new customers, what their advertising practices are, if they educate customers on the “risks” associated with making wagers, how they engage with social media influencers, what data it has on how New York City residents engage with the platform, what contracts or payments they’ve made to New York City or State agencies to place or display advertisements on city property and whether they take precautions to not market to minors.
Menin, who formerly chaired the city’s Department of Consumer and Worker Protection, said she takes consumer protection “extremely seriously” and would be using that background, as well as the “full power” of the Council, to take a look at how local lawmakers could put some guardrails on the platforms that have so far evaded regulation by the states.
New York is one of a handful of states across the country that are trying to argue in state and federal court that its gambling laws should apply to prediction markets and that the platforms should be regulated by its Gaming and Trades Commission.
A federal judge preliminarily ruled in favor of New York in its efforts, disagreeing with the platforms that they are not gambling businesses and instead are essentially another form of stock market that should be regulated by the Trump-friendly federal Commodity Futures Trading Commission, which says it supports them operating essentially unrestricted under its purview.
Judges have issued rulings favorable to prediction markets in similar cases across the country, including in Minnesota and New Jersey, but courts remain divided on the issue, with a judge in Wisconsin also ruling in favor of at least state regulation. Legal experts have said the matter will likely be taken up by the U.S. Supreme Court in the future.
Regardless of how those legal battles play out, the City Council says it wants to do what it can to regulate the prediction markets via their advertising methods – essentially curbing who and how many people the platforms reach – legislation it believes it does have the authority to pass.
Council members like Harvey Epstein (D-Manhattan), who chairs the Council’s Committee on Consumer and Worker Protection and Shekar Krishnan (D-Queens), who chairs the Council’s Committee on Oversight and Investigations, said the industry’s “aggressive” marketing and lack of ability to be restrained by typical marketing and consumer protection restrictions that govern casinos and online sports betting made the Council’s investigation critical.
“Apps like Polymarket are expanding rapidly unchecked,” said Krishnan. “Their unprecedented reach is because they are preying on young adults and minors with deceptive and sometimes outright false marketing tactics that pull them in and wring them dry.
