Coinbase Global Inc. (NASDAQ:COIN) has been swept into New York City’s widening scrutiny of prediction markets, even as the CFTC push back against the state’s attempts to rein in the fast-growing industry.
New York City Council Speaker Julie Menin announced an investigation into Coinbase, Polymarket, Kalshi and Gemini Titan after sending the four companies letters seeking details on their marketing practices.
The Council probe adds to Coinbase’s existing regulatory fight with New York.
Attorney General Letitia James sued Coinbase and Gemini in April, alleging their prediction market businesses constituted illegal, unlicensed gambling operations and seeking to stop them from offering the products in the state.
The announcement came one day after the Commodity Futures Trading Commission invoked emergency authority to order Kalshi to keep operating, a direct response to a separate lawsuit James filed seeking to block the exchange from offering event contracts.
Coinbase, Polymarket and Kalshi Face Marketing Probe
The Council said it is examining potentially false, deceptive or abusive marketing by prediction market platforms, with particular concern about advertising that may reach young people.
Menin’s letter’s posed more than 60 questions and gave the companies 14 days to respond, according to The Wall Street Journal.
While Coinbase is among the four companies under scrutiny, the Council’s specific allegations focused largely on Polymarket.
Menin cited allegations that influencers promoting the platform posted videos depicting trades that did not exist, used websites made to resemble Polymarket and promoted insider trading.
Polymarket said it looks forward to engaging with the Council, while a Coinbase spokeswoman said the company “fully complies with applicable laws.”
CFTC Orders Kalshi to Keep Operating
On Tuesday, the CFTC ordered Kalshi to keep operating while its legal fight with New York plays out. The state is seeking a court order that would block Kalshi from offering event contracts and is demanding more than $36 billion in damages.
“New York has no business regulating these interstate financial markets,” CFTC Chairman Michael Selig said.
The CFTC order does not end James’ lawsuit, leaving the underlying dispute over state and federal authority unresolved.
Kalshi and Benzinga have an existing data collaboration agreement.
Who Gets to Regulate Prediction Markets?
New York argues prediction markets can still fall under state gambling laws, while Kalshi and the CFTC say federally regulated exchanges are Washington’s territory.
The Council probe is separate from James’ lawsuits, but together they show New York pressurising the industry on two fronts: challenging whether prediction markets can legally operate in the state while scrutinizing how they are marketed.
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