NEW YORK – The videos circulate on TikTok and Instagram: a trader flips a small bet into thousands on Polymarket, the screen showing what appears to be real winnings in real time. New York City Council Speaker Julie Menin said Wednesday at least some of those trades were staged, and she opened a formal investigation to find out how many.
The probe, announced Wednesday, targets four prediction market companies: Polymarket, Kalshi, Coinbase, and Gemini. The council says the platforms deployed a range of deceptive tactics, including videos depicting fake trades designed to resemble the platforms’ own interfaces, undisclosed influencer marketing, and advertisements that showed “fictitious depictions of profitable wagers” that would in fact have generated losses. The council also alleged the platforms marketed to young people through potentially false advertising and promoted what it characterized as insider trading.
The council’s authority sits separately from the other legal challenges these platforms are already fighting. New York Attorney General Letitia James sued Kalshi in late July, calling it an illegal gambling operation and seeking $36 billion in civil penalties, a case the federal Commodity Futures Trading Commission immediately moved to block on pre-emption grounds. That lawsuit turns on whether prediction markets constitute gambling under state law. The council’s investigation asks a narrower and more durable question: whether the marketing itself is honest. Under New York City’s consumer protection code, deceptive advertising is prohibited regardless of how the underlying product is legally classified.
The prediction market industry expanded rapidly in 2025 under the CFTC’s protection. Federal courts in Michigan and Minnesota sided with Kalshi when those states tried to halt its operations, holding that the Commodity Exchange Act pre-empts state gambling laws. As the ruling that blocked Minnesota’s prediction market ban made clear earlier this month, the CFTC’s licensing authority appears, for now, to shield these platforms from state enforcement. But CFTC pre-emption doctrine addresses regulatory jurisdiction, not the truthfulness of an advertisement. It cannot be invoked to defend a fake trade video.
Menin’s office notified each of the four platforms Wednesday and requested details about their marketing practices reaching New York residents. The council is examining whether it should introduce additional “consumer protection legislation, enforcement, public education campaigns, health measures, and funding” in response. The inquiry follows a Wall Street Journal investigation in June that documented Polymarket’s use of fabricated winnings in influencer-produced promotional content, the same conduct the council cited in its announcement.
None of the four companies had issued public statements in response to the probe as of Wednesday evening. Coinbase and Gemini operate primarily as cryptocurrency exchanges and added prediction market functionality following CFTC rule changes in 2025; both are also named in the existing New York attorney general’s lawsuit. Kalshi and Polymarket are the industry’s two largest dedicated platforms. None of the four responded to the council’s announcement.
Prediction markets grew partly on the claim that they were more honest than financial media, that contract prices reflected genuine crowd-sourced probability rather than punditry. Their marketing, however, has operated by different rules. The platforms relied heavily on social media influencers, college campus campaigns, and viral content to expand their user base after CFTC rule changes opened the door to retail traders. The council’s allegations suggest that for some portion of those campaigns, the platforms’ own interfaces were used as props in content they either produced or funded, with no disclosure of the paid relationship and outcomes that never existed.
Kalshi’s market integrity has already come under scrutiny in a different context. The company settled $3.3 million in Spotify chart contracts after a trader warned the market was being manipulated, within minutes of the alert and before Spotify confirmed the problem by removing 523,000 artificial streams the following day. In that case, as in the marketing investigation now, the issue was not whether event contracts are legal but whether the platform operated honestly within the rules it claimed to follow.
What the council can ultimately compel the platforms to do remains unclear. City-level enforcement actions against federally licensed commodity exchanges would encounter the same pre-emption arguments that have stalled state AG offices in federal court. What the probe can produce, and what Menin has signaled she intends to produce, is a public record: the marketing materials, the demographics reached, and the gap between what those campaigns promised and what the platforms actually delivered. The prediction markets, whose model depends on information being priced accurately, are being evaluated on the same standard they apply to everything else.
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