New York City Launches Sweeping Probe Into Polymarket, Kalshi Over Marketing Practices

• City Council investigation targets four prediction-market platforms over alleged deceptive advertising, potential targeting of minors and compliance with consumer-protection laws.

The New York City Council has launched a sweeping investigation into prediction-market companies including Polymarket and Kalshi, opening a new regulatory front for an industry already facing mounting scrutiny from state and federal authorities.

City Council Speaker Julie Menin sent letters on 11 August to Polymarket, Kalshi, Coinbase and Gemini Titan seeking information about their marketing practices, operations and compliance with consumer-protection requirements. The investigation is focused on allegations that prediction-market platforms may use deceptive marketing tactics and target younger users, including minors.

The inquiry adds another layer to the increasingly complex regulatory environment surrounding prediction markets, where companies argue that their platforms operate as federally regulated financial markets while state and local authorities question whether some products amount to gambling.

For compliance teams, the investigation places marketing practices firmly alongside licensing and financial regulation as a potential source of enforcement risk.

Polymarket is facing particular scrutiny over promotional content. A Wall Street Journal investigation found that a large proportion of promotional videos for the platform showed simulated or misleading trading activity, including videos that allegedly gave viewers an inaccurate impression of users’ trading results. Polymarket subsequently said it would audit its promotional content.

The New York City investigation is also examining whether prediction-market companies’ advertising practices could encourage risky behaviour among younger consumers.

That creates a broader compliance challenge for the industry. Companies operating in a rapidly developing regulatory market must not only establish that their products comply with applicable financial and gambling rules; they must also ensure that the way those products are marketed does not create separate consumer-protection exposure.

The investigation comes as the regulatory battle over prediction markets continues across the United States.

New York Attorney General Letitia James has already taken legal action against Kalshi, alleging that the company is operating an illegal gambling platform in the state. Kalshi disputes that characterisation and maintains that it operates a federally regulated exchange. The Commodity Futures Trading Commission has backed the federal regulatory framework governing prediction markets, creating an increasingly visible conflict between federal and state authorities.

The City Council’s investigation is distinct from the question of whether prediction markets constitute illegal gambling. Instead, the council says it is examining deceptive and potentially predatory marketing practices and whether additional consumer protections, legislation or enforcement measures are required.

For the companies involved, the investigation could therefore extend compliance obligations beyond the trading platform itself.

Marketing departments, influencer programmes, promotional agencies and third-party content creators can all create regulatory exposure if advertising claims are inaccurate, material information is omitted or campaigns reach audiences that should not be targeted.

The case also highlights the importance of governance between compliance, legal, marketing and product teams. A platform may have a regulatory framework for its underlying financial product while still facing scrutiny over how that product is presented to consumers.

The New York City Council has requested detailed information from the companies and plans to hold a hearing as it considers whether existing protections are sufficient.

For an industry expanding rapidly into sports, politics and other event-based markets, the investigation represents another warning that regulatory risk does not stop at the trading interface.

Marketing claims, influencer relationships, customer demographics and consumer-protection controls are increasingly becoming part of the compliance perimeter.