Aug 12 (Reuters) - New York City Council Speaker Julie Menin has accused major prediction market startups of using predatory marketing practices to exploit young traders, according to a letter sent to Polymarket that shows the council has opened an investigation into the allegations.
The letter from Menin to Polymarket CEO Shayne Coplan, dated August 11, also named other prediction market platforms, including Kalshi, Coinbase and Gemini Titan, in connection with alleged marketing practices targeting
young users.
Prediction market startups such as Polymarket allow people to wager on event contracts across topics including politics, sports and entertainment. The sector has expanded rapidly in recent years, attracting a large base of traders.
Critics say the platforms are little more than gambling and could pose risks tied to insider trading and habit-forming behavior.
The letter, citing news reports, said Polymarket allegedly conspired with marketing agents and social media influencers to target young adults and potentially minors with false and deceptive advertising.
New York Attorney General Letitia James sued prediction market Kalshi last month asserts that the platform violates New York State gambling laws.
The investigation by the New York City Council could become a defining test for Polymarket and other prediction market platforms as they defend their business model against state regulators challenging event contracts, including sports-related markets.
Polymarket is regulated by the U.S. Commodity Futures Trading Commission. Earlier this year, the CFTC sued New York, accusing the state of encroaching on federal authority by pursuing prediction-market companies under gambling laws.
According to the letter, Polymarket allegedly paid influencers without disclosure, produced videos showing fake trades on sites built to mimic its platform, presented losing bets as winners and encouraged insider trading.
The letter also asked Polymarket to answer questions about its use of social media, influencers and content creators in its marketing campaigns.
The Council has requested that Polymarket respond to all queries within 14 business days.
(Reporting by Pritam Biswas in Bengaluru; Editing by Tasim Zahid)
