Letters cite reports of fake trades and potential targeting of minors
Menin’s letters, sent to all four companies on Aug. 11, posed more than 60 questions about how much the companies earn in New York, how many users are city residents, and how their marketing operations work. The companies have 14 days to respond.
In a letter addressed to Polymarket founder and Chief Executive Shayne Coplan, Menin asked for details about promotional videos that appeared to depict fake trades and promoted insider trading on social media. Menin wrote that some of the advertisements may have targeted minors.
“[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,” Menin wrote, according to a copy of the letter reviewed by the Journal.
The letters follow a June Wall Street Journal analysis of more than 1,100 videos made by Polymarket creators, along with instructional materials and interviews with influencers who had worked with the company. That analysis found that 70% of the videos featured dummy sites the company used to film fake trades.
A spokeswoman for Polymarket said the company looks forward to engaging with the city council. In response to the Journal’s earlier reporting, Polymarket said it was “committed to maintaining accurate, fair, and transparent markets” and that it would undertake an audit of its promotional content. The company has since restructured its marketing team, hiring Travis VanderZanden, founder of the e-scooter company Bird, as head of growth, VanderZanden wrote in a LinkedIn post Tuesday.
Kalshi and Gemini Titan did not respond to requests for comment. A Coinbase spokeswoman said the company “fully complies with applicable laws.”
While the City Council has no power to bring criminal charges, it can issue subpoenas forcing the companies to turn over documents — an authority it has rarely, if ever, used on a private firm. Menin said the council was considering legislation authorizing “increased enforcement, public education campaigns, health measures, and/or the raising or redirecting of public funds” to address prediction markets, and that it intends to hold public hearings on the issue.
The investigation adds a municipal enforcement front to a patchwork of state and federal actions already targeting prediction markets. Last week, James sued Kalshi, accusing the company of illegally operating a gambling app.
Kalshi and other prediction markets say their business model differs from sports gambling because users trade against each other, rather than against a house, more akin to an exchange.
“States can’t just shut down a federally licensed exchange,” Kalshi spokeswoman Elisabeth Diana said previously in response to the lawsuit.
In July, Kalshi made overtures to New York, offering a share of its trade revenue in taxes and volunteering to allow users to exclude themselves from the app. That proposal escalated into a public dispute, with New York Gov. Kathy Hochul attacking the company’s bet-on-almost-everything ethos, arguing that Kalshi markets for whether drug trials will be successful are akin to wagering on death.
“There are some lines you don’t cross. Turning cancer patients into a prop bet is one of them,” Hochul said in an Aug. 5 post on X. “And it’s exactly why New York won’t let companies like Kalshi break our laws.”
Luana Lopes Lara, Kalshi’s co-founder and operating chief, responded less than a half-hour later: “This is flat out a lie.”
On Tuesday, the Commodity Futures Trading Commission, which under the Trump administration has asserted exclusive authority to regulate prediction markets, announced it was exercising emergency authority in ordering Kalshi “to continue to operate in accordance with the Commodity Exchange Act’s Core Principles” in the face of James’s complaint.
“The New York State Attorney General does not set the rules for national derivatives markets,” said CFTC spokeswoman Brooke Nethercott. “That’s the Congressionally mandated role of the CFTC.”