The New York City Council is investigating potentially deceptive marketing strategies used by prediction platforms such as Kalshi and Polymarket, officials confirmed on Wednesday.
The office of Council Speaker Julie Menin confirmed that Kalshi, Polymarket, Coinbase and Gemini Titan had all been accused of wrongdoing.
Key Takeaways
- Allegations of the platforms using “deceptive” and “false” marketing were levied.
- The probe does not pertain to the legitimacy of event contracts.
- A Wall Street Journal report detailed how celebrity partners were made to appear as if they were winning money by trading on Polymarket.
According to a letter written by Menin, the Council was examining allegations of “false, deceptive, unconscionable, and objectionable marketing practices” by each of the four prediction market platforms. Although she did not provide an exact timeline, she claimed that these practices had been used by the platforms for “months.”
“Prediction markets aggressively entice consumers to bet and wager on sports, politics, culture, weather, and pretty much anything,” Menin said in a statement. “I intend to harness the full power of the Council to protect New Yorkers from deceptive and predatory marketing practices by prediction market platforms.”
The letter references a probe conducted by The Wall Street Journal, which found that Polymarket knowingly led misleading marketing campaigns. They did this by appearing to show that popular content creators with whom they had partnered were winning money on their platform, when those individuals weren’t trading with their own money.
That report prompted the Commodity Futures Trading Commission (CFTC) to open an investigation into Polymarket, which had previously been banned from operating in the U.S. after it was found to have operated an unregistered derivatives and futures trading market.
Menin’s letter said that the Council was hoping to find if this strategy, along with other improper or inadvisable practices, were also used by Kalshi and other competitors.
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Focused on marketing, not contracts
In addition to simply unearthing the truth behind prediction platforms’ advertising standards and behaviors, Menin’s letter included a memo that said that the allegations against Polymarket may have necessitated legislative or policy changes for prediction markets. Her office said that the Council intends to hold a later hearing to debate the topic.
Prediction platforms have come under heavy fire across the country in recent weeks. Kalshi is currently dealing with a lawsuit filed in a New York federal court by Attorney General Letitia James and Gov. Kathy Hochul (D), in which it was accused of operating an illegal gambling platform.
While many state officials are still discontented with prediction platforms’ regulatory standards, Menin’s letter stated that the probe did not pertain to the legality of the event contracts.
“We look forward to engaging with The New York City Council on this matter,” a Polymarket spokesperson said in a statement.
Notably, Polymarket last week announced the hiring of Travis VanderZanden as its chief growth officer. VanderZanden founded the e-scooter startup Bird and previously worked at Uber Technologies and Lyft.
“It’s an exciting time to come in as we build out the executive team to help guide the next stage and make sure we’re buttoned up for the long haul,” VanderZanden said in a statement shared with CNBC.
Important times ahead?
Kalshi, Polymarket and Gemini all maintain home bases in New York City. Coinbase is headquartered in Texas, but has plans to add more than 1,000 employees to a New York office.
The home operating location of the companies shouldn't change any marketing-related approaches or standards, but it makes the case close to home for New York officials. The ongoing litigation against Kalshi’s prediction markets also makes this a crucial time for the operators, who are preparing for the rush of the NFL season and midterm elections.
Recent prediction market news has taken a turn in direction. After largely winning legal disputes and receiving full-throated support from the CFTC, courts in numerous states, such as Wisconsin, Utah, and New York, have ruled against prediction market operators.
