The New York City Council has sent investigative letters to four prediction market platforms—Polymarket, Kalshi, Coinbase, and Gemini—over advertising practices, risks of exposure to minors, and consumer protection, focusing on whether simulated trading videos mislead users.
A video showing a trader rapidly raking in huge returns from event predictions—except the footage was simulated. That's one detail specifically flagged in the City Council's investigation. Citing related findings, the Council pointed out that some of Polymarket's promotional videos used simulated or fabricated trading footage to depict scenarios of quick profits, with council members questioning whether such presentations could give consumers a distorted impression of actual odds of profit and potential losses.
The New York City Council has announced an investigation into four platforms offering prediction market services—Polymarket, Kalshi, Coinbase, and Gemini Titan—led by Council Speaker Julie Menin. The Council has sent letters to each of the four companies demanding answers to more than 60 questions, covering platform operations, revenue sources, marketing spending, advertising strategies, user age verification mechanisms, and how each company complies with relevant federal, state, and local regulations.
Beyond simulated trading footage, some promotional content has also come under scrutiny for allegedly leveraging concepts like "insider information" to attract users. Prediction markets cover events across politics, sports, economics, war, and entertainment, with trading prices shifting rapidly based on the latest news—how platforms handle trades that may involve undisclosed information has become a recent focus for U.S. regulators and Congress. The Council also asked the companies to explain whether their advertising targets minors or younger demographics, along with the age verification methods actually in place.
Kalshi Caught Between Federal and New York State Rules
This investigation has also brought the murky legal status of prediction markets into the spotlight. Kalshi positions itself as a Designated Contract Market regulated by the Commodity Futures Trading Commission (CFTC), operating its event contracts under federal commodities law. However, New York State Attorney General Letitia James has already filed a lawsuit against Kalshi, alleging that some of its sports event contracts constitute unlicensed gambling activity that potentially circumvents state licensing, taxation, and consumer protection requirements for gambling operators. Kalshi, for its part, maintains that it falls solely under federal jurisdiction and is not subject to state law—setting the stage for a jurisdictional clash between federal commodities regulations and state gambling laws.
The City Council itself lacks criminal investigative authority, but it does hold the power to issue subpoenas and demand that companies provide information; if a company fails to cooperate, documents can be compelled through legal proceedings. There's no concrete timeline yet for the investigation's findings, but the Council says the results will inform future local legislation, with potential measures including advertising disclosure requirements, protections for minors, and risk warnings.
