The New York City Council has initiated an investigation into the marketing practices of major prediction market operators, including Polymarket, Kalshi, and their associated products from Coinbase and Gemini Titan.
Officials are concerned that these platforms may be employing misleading advertising, undisclosed payments to influencers, and targeting young individuals, potentially including minors, with their betting promotions.
The investigation was prompted by reports of videos showcasing what appeared to be genuine profitable trades, which were later revealed to be staged. Additionally, there are concerns regarding instances where losing bets were misrepresented as winning, and the advertising was seen to encourage gambling-like behavior.
“For several months, we have been examining issues related to accusations of predatory marketing practices that are characteristic of the rapidly growing prediction market industry in New York. Some of these practices raise serious concerns,” stated the Council.
It's important to note that this inquiry by the City Council is separate from the ongoing conflict between the state authorities and Kalshi. New York Attorney General Letitia James has filed a $36 billion lawsuit against the platform, accusing it of operating illegal gambling without a license.
CFTC Keeps a Close Eye on the Sector
On the same day, the Commodity Futures Trading Commission (CFTC) released a clarification regarding regulated event contracts. The Commission indicated that it is receiving an increasing number of applications for incentive programs involving market making, liquidity provision, and trading products that have procedural and substantive deficiencies.
The regulator reminded platforms of the need to disclose the terms of such offerings and to evaluate their compliance with the fundamental principles governing licensed exchanges.
Both actions impact the prediction market segment, which is valued at $300 billion. In July, the total trading volume for Kalshi, Polymarket, and Polymarket US reached a record $50.59 billion.
It is worth noting that the U.S. Congress has considered potential federal intervention in disputes between the CFTC and states regarding the regulation of prediction platforms.