Key Insights
- New York City Council opened an investigation into Kalshi, Polymarket, Coinbase and Gemini Titan.
- FlightAware withdrew its lawsuit against Kalshi one day after filing the case.
- Prediction-market activity has cooled from World Cup highs, while fundraising discussions continue.
Kalshi and Polymarket faced renewed scrutiny this week as New York City officials investigated their marketing practices.
The inquiry followed separate state litigation over whether prediction markets violate New York gambling laws. Trading activity has also cooled from World Cup highs, although the platforms continue attracting substantial investor interest.
FlightAware added another legal issue for Kalshi on Aug. 11. However, the flight-tracking company withdrew its lawsuit one day later without publicly explaining why.
New York City Investigates Kalshi and Polymarket
One of the top news stories affecting the industry is that the New York City Council has launched an investigation on Kalshi and Polymarket. This investigation centers on how the two companies are marketing their services and how they are targeting minors.
According to the Wall Street Journal, Julie Menin, the City Council Speaker, has sent letters to companies like Polymarket, Kalshi, Coinbase, and Gemini, asking them to share details of their promotional videos that seem to depict fake trades. This investigation followed a review by WSJ that showed that these firms are relying on creators who showcase fake trades.
The new investigation comes a few weeks after Letitia James, New York’s Attorney General sued Kalshi for illegally operating a gambling application in the state. She is seeking $36 billion from the company.
Kalshi has argued that its business differs from other gambling companies in that traders bet against each other. This is different from how other traditional gambling companies operate, where users bet against the house.
On the positive side for Kalshi, the Commodity Futures Trading Commission (CFTC) allowed it to operate in New York. CFTC argues that it is the main regulator for these companies.
Other states have sued the two companies in the past. The most notable ones were Nevada, Kentucky, and Arizona.
Kalshi Sued by FlightAware
Meanwhile, Kalshi received another lawsuit this week. FlightAware, a company that operates a flight comparison website and apps, sued it for using its data and name to run gambling markets on flight cancellations.
This lawsuit came a few weeks after Kalshi launched a new market allowing customers to bet against flight-cancellation risk. FlightAware argues that Kalshi was using its platform for gambling without its authorization. Also, it notes that the service may lead to manipulation, where people can create incentives for cancellations.
Kalshi and Polymarket’s Volume Has Dropped
The other key issue facing the two companies is that their volume has dropped modestly after the World Cup event.
DeFi Llama data shows that Kalshi’s volume stood at over $2.48 billion last week, down slightly from the previous week’s $2.54 billion. At the peak of the World Cup, the company was handling over $3 billion.
The same is happening with Polymarket, whose weekly volume dropped to $471 million last week. This weekly volume peaked at over $1.2 billion.
Looking ahead, the volume will likely start peaking up again in the coming months because of the upcoming US midterm elections. They will also benefit from the upcoming European soccer leagues like the English Premier League and La Liga.
Fundraising Continues Despite Regulatory Pressure
Investor interest has remained strong despite the legal disputes. Kalshi raised $1 billion at a $22 billion valuation in May. It later entered discussions about another financing round that could value the company near $40 billion, according to reporting citing people familiar with the talks.
That $40 billion figure remains a proposed valuation rather than a completed funding round.
The draft’s claim that Kalshi reached a $4 billion annualized revenue run rate also requires stronger sourcing. Earlier reports placed the company’s annualized revenue around $1.5 billion to $2 billion, although its World Cup growth may have lifted that figure afterward.
Polymarket is separately discussing a roughly $1 billion funding round at a valuation above $20 billion. The talks followed an April financing that valued the company around $15 billion.
The $20 billion figure would put Polymarket above DraftKings’ current market capitalization only if the fundraising closes at that valuation. Private-company valuations and public-equity market capitalizations are also not directly comparable measures.
Prediction Markets Face Growth and Regulatory Test
Kalshi and Polymarket entered August with strong investor backing but greater regulatory pressure.
The New York City investigation adds marketing practices and younger-user protections to existing disputes over sports contracts and state gambling laws. FlightAware’s withdrawn lawsuit also showed how new contract categories can create disputes with outside data providers.
World Cup volumes have eased, but trading remains well above levels seen before prediction markets accelerated during 2025 and 2026.
The larger issue is now regulatory jurisdiction. Kalshi and Polymarket argue that federally regulated event contracts fall under commodities law, while several states continue treating sports-linked contracts as gambling products.
This article is for informational purposes only and does not constitute financial or investment advice. Prediction markets and digital assets can involve substantial financial risk. Readers should conduct their own research before making financial decisions.
Crispus is a distinguished Financial Analyst at, bringing over 12 years of expertise in cryptocurrency markets, specializing in Bitcoin and altcoins. Renowned for his sharp insights at the nexus of market trends and breaking news, Crispus delivers actionable analysis to empower investors. His work is prominently featured across leading platforms, including BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com, cementing his reputation as a trusted voice in the financial world.
