New York City Council has opened a new front against prediction markets, with Council Speaker Julie Menin sending investigative letters to four companies operating in the space: Polymarket, Kalshi, Coinbase, and Gemini Titan. The companies were asked to answer questions about how they market their services and whether they’re complying with consumer protection laws. In her letter to Polymarket, Menin demanded explanations about the company’s promotional videos, which she claims featured fake trades and even promoted insider trading on social media. She also raised concerns that some of the ads targeted minors. A June investigation published in The Wall Street Journal examined more than 1,100 videos from content creators linked to Polymarket and found that roughly 70% included dummy sites used to film fake trades.
1+Menin presented the companies with more than 60 questions about their revenues in New York, the number of users living in the city, and their marketing activities, giving them 14 days to respond. The City Council doesn’t have authority to file criminal charges, but it can issue subpoenas requiring companies to turn over documents. Meanwhile, the council is considering legislation to increase enforcement and oversight of prediction markets and is planning to hold public hearings on the issue.
The investigation comes against the backdrop of a fierce legal battle over the status of prediction markets in the U.S. About a week ago, New York Attorney General Letitia James sued Kalshi, claiming the company is operating an illegal gambling app. Kalshi rejects the claim, arguing that its operations differ from sports betting because users trade with each other rather than against “the house,” making it more similar to a stock exchange.
But New York faces off against the federal regulator. The Commodity Futures Trading Commission (CFTC) announced it is exercising emergency authority and ordered Kalshi to continue operating in accordance with the principles of the Commodity Exchange Act. This sharpens the central question in the battle: Are prediction markets essentially gambling venues subject to state regulation, or financial markets under federal regulatory authority?
1+The confrontation has even spilled into a public fight between Kalshi and New York Governor Kathy Hochul. The governor attacked the ability to bet on a wide range of events, particularly on the success of medical trials, claiming such bets turn the lives of cancer patients into “a side bet.” Kalshi responded sharply, calling the statement “an outright lie.”
Behind the legal battle lies a larger fight over the boundaries of a new and growing market in the U.S. Platforms like Kalshi and Polymarket allow users to trade on the outcomes of events, ranging from sports and politics to economic and medical developments. As the sector expands, the clash with state authorities intensifies—states seeking to apply gambling laws while the federal government seeks to maintain control under financial regulation.