New York City Council investigates marketing practices of prediction market platforms

The New York City Council is investigating marketing practices by prediction market platforms, the office of Council Speaker Julie Menin said on Wednesday.

In letters to four prediction market platforms — Polymarket, Kalshi, Coinbase and Gemini Titan — Menin wrote that the council has been examining allegations of "false, deceptive, unconscionable, and objectionable marketing practices" by event contract exchanges 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."

Menin the letters referenced an investigation by The Wall Street Journal that claimed that Polymarket conducted misleading marketing campaigns. The Journal said in a June article that Polymarket made it appear as though content creators it partnered with were winning on the platform when, in fact, they were not using their own money. The Journal's reporting led to an investigation by the Commodity Futures Trading Commission, the federal regulator for prediction markets.

CNBC reported on Tuesday that Polymarket has taken steps to revamp its marketing strategy, including through updated and streamlined guidelines for staff at the company and the content creators it works with.

Menin added in her letters to the platforms that the council is investigating whether such advertising strategies are used by other prediction market companies. A memo attached to these letters said the allegations against Polymarket show an urgent need to determine if legislation or other policy changes are necessary. Menin's office added that the council plans to hold a hearing on the matter.

The memo, which also described the probe, made clear that the inquiry is not exploring whether or not event contract exchanges violate New York's state gambling laws.

New York state is currently in active litigation against Kalshi, Coinbase and Gemini, alleging that the companies are running illegal gambling operations. The platforms assert that they are federally regulated financial exchanges and aren't subject to state betting laws. New York state is currently not in litigation against Polymarket.

Kalshi, Polymarket and Gemini are all headquartered in New York City. Coinbase officially operates out of Texas, but announced plans earlier this year to expand its total workforce to more than 1,000 employees in New York.

"We look forward to engaging with The New York City Council on this matter," a Polymarket spokesperson said in a statement.

When contacted by CNBC for comment, a Coinbase spokesperson said, "Coinbase offers our customers access to federally regulated prediction markets overseen by the CFTC, and fully complies with applicable laws."

Kalshi and Gemini did not immediately respond to requests for comment.