New York City Council Investigates Polymarket and Kalshi Over Marketing

A significant regulatory storm is gathering in New York City for providers of so-called prediction markets. While these platforms, where users can bet on the outcome of real-world events, are gaining popularity globally, they have now moved into the crosshairs of city authorities. The New York City Council has launched a comprehensive investigation focusing on the marketing practices of industry giants like Polymarket, Kalshi, Coinbase, and Gemini Titan. The investigation centers on serious allegations of targeting minors and young adults with questionable methods to draw them into the world of online betting.

Council Speaker Julie Menin sent letters on August 11 to the affected companies, demanding detailed information. The allegations are heavy: it is suspected that Polymarket worked with marketing agents and social media influencers to reach an audience that, legally, should not be participating in gambling or speculative financial transactions. Particularly sensitive is the mention of possible fake trades, which could suggest an artificial attractiveness of the platforms. The companies now have 14 days to respond to the extensive questionnaire.

Numbers and facts

The City Council's inquiry includes more than 60 individual questions that delve deep into the business secrets of the platforms. Data is requested for the period starting January 1, 2025. Authorities want to know exactly how many users are registered in New York City, their demographic characteristics, and how much city residents have won or lost. A central point of the investigation is the effectiveness of marketing campaigns. The city is demanding insight into payments made to influencers and wants proof of how many young users were attracted by these marketing measures.

"[T]roubling news reports allege that Polymarket conspired with marketing agents and social media influencers to target young adults—and thus potentially minors—with false, deceptive, and unconscionable advertising." - Julie Menin, Council Speaker at NYC Council

While Polymarket and Kalshi have already signaled their willingness to cooperate with the Council, Coinbase was confident, stating that it fully complies with all applicable laws. Gemini Titan, on the other hand, did not immediately provide a comment. The investigation is significant because although the City Council cannot bring criminal charges, it has the power to issue subpoenas and require the production of documents. Furthermore, there is the threat of new legislation for consumer protection and public education campaigns.

Background

The City Council inquiry is just one of many fronts where prediction markets are currently fighting. On July 31, New York Attorney General Letitia James sued the provider Kalshi, alleging it operates an illegal and unlicensed gambling business. Kalshi, in turn, defends itself by arguing that its event contracts are federally regulated derivatives under the Commodity Exchange Act. Two worlds collide here: while states try to enforce consumer protection and gambling monopolies, platforms rely on the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).

This conflict between federal and state law causes considerable legal uncertainty. On the same day as the Council's inquiry, the CFTC exercised its emergency authority and ordered Kalshi to continue operations in accordance with federal requirements, despite New York's efforts to shut the platform down. However, the New York City Council is explicitly focusing its current investigation on consumer protection and marketing, which is a clever way to bypass the complex jurisdictional question between gambling law and financial market regulation.

Why it matters for German players

For German players, the situation in New York is an important reminder to be cautious. Prediction markets like Polymarket or Kalshi do not hold a license from the Gemeinsame Glücksspielbehörde der Länder (GGL) in Germany. According to the State Treaty on Gambling 2021 (GlüStV 2021), such offers are illegal on the German market unless they are explicitly listed on the GGL whitelist. In Germany, strict rules apply to protect players, such as the monthly deposit limit of 1,000 euros via the LUGAS system and the stake limit of 1 euro per round for virtual slot machines.

Anyone using unregulated platforms exposes themselves to high risk. In the event of disputes or withdrawal problems, there is no German leverage against providers based abroad or those operating only via crypto interfaces. Furthermore, youth protection in Germany is much more strictly regulated through mandatory identity checks (KYC) than on many international prediction platforms, which often only require an email address or a crypto wallet. German users should therefore consistently rely on GGL-licensed providers to be legally protected.

What it means for GGL-licensed casinos

For licensed German online casinos, the investigation in the USA represents a confirmation of their strict course. While international platforms are being criticized for influencer marketing targeting minors, GGL providers in Germany are subject to strict advertising bans and channel separation requirements. The allegations against Polymarket show how quickly aggressive marketing strategies can lead to regulatory difficulties. German operators who adhere to the rules of the GlüStV 2021 can use the current debate to highlight their reliability and contribution to youth protection. Clearing the market of unregulated actors, who are often active in Germany via social media, remains a central goal of local regulation.