Prediction markets have grown in popularity over the last two years. But a new lawsuit against Polymarket and key executives alleges they engaged in a deceptive marketing campaign to lure in American users. Additionally, it alleges they unfairly targeted college-aged individuals.
The legal team representing the National Association of Consumer Advocates filed the suit in the Superior Court of the District of Columbia. It claims Polymarket obscured the likelihood that bettors would lose. The complaint names founder and CEO Shayne Coplan and Chief Marketing Officer Matthew Modabber.
Attorneys for the plaintiff allege Coplan holds “ultimate decision-making authority” over operations and marketing. Modabber personally oversaw advertising practices at the center of the case.
The NACA is a nonprofit group of more than 1,500 attorneys and consumer advocates who represent consumer interests.
Lawsuit Claims Fake Website Used
The plaintiffs allege Polymarket paid content creators to film themselves placing bets on fake versions of the Polymarket site. The company then allegedly presented the videos as legitimate experiences of ordinary users. Many of those creators were college aged and were paid $2,000 to $3,000 a month.
According to a Wall Street Journal report, of 1,105 videos reviewed from 10 creators tied to Polymarket’s marketing vendor, 70% showed a creator placing a bet. The on-screen wagers totaled $1.9 million, and 118 videos depicted creators winning nearly $900,000.
“A handful of videos the Journal reviewed also contained short glimpses of URLs indicating the sites were test environments for Polymarket engineers,” the newspaper noted of the videos.
None of the bets were real. If those same 118 bets were with real money, the creators would have lost more than $166,000. Nearly 25% of the videos used the word “free,” framing the wins as easy money, according to the lawsuit.
Creators Allegedly Told To ‘Warm Up’ New Social Media Accounts
The rush to create viral content is a major part of the lawsuit. The NACA describes the practice as “clipping.” The defendants allegedly paid social media influencers to create short clips, post them on accounts meant to look like ordinary users, and spread them across social media.
Attorneys said the clippers were paid about $1 for every 1,000 views. Moreover, they were explicitly required to deliver a US audience.
“The instructions were built to disguise advertising as organic content,” the complaint alleges. “Clippers were told, in defendants’ own materials quoted by the complaint, ‘Do not make the videos feel like ads or promotions.’”
The lawsuit as well as the Wall Street Journal allege Polymarket’s marketing firm even barred creators from putting “Polymarket” and even “poly” in their account names. Influencers were allegedly coached to “warm up” new accounts over several days so platforms would treat them as genuine users.
The suit alleges one Polymarket clipping campaign paid out $8,892 across 4,700 submissions that generated 9.1 million views. In another example, a single video drew just 151 views on its own before a clipping campaign pushed it to 2.4 million.
Targeting College-Aged Consumers
The complaint alleges that in addition to deceptive practices, Polymarket unfairly aimed manipulative marketing at college-aged consumers. That included recruiting campaigns directly on college campuses, paying students up to $2,000 per campaign, and offering fraternities cash for every new user they signed up.
“In one episode described in the complaint, defendants hyped Polymarket platforms by inviting roughly 20 fraternity brothers from Columbia University to their New York office, fed them pizza and wings, gave them $10 each to bet, and later sent a wooden plaque honoring them as ‘the first Polymarket Pledge Class,’” the lawsuit claims.
That chapter reportedly earned $30,510 in two weeks using a referral code. In messages quoted in the complaint, Polymarket representatives told fraternity leaders the company was “increasing the payout to $15 per user” and coached members on how to “make bags.”
College students experience gambling problems at about twice the rate of US adults overall, and experts have become concerned about betting among younger adults.
Polymarket Responds
The Superior Court of the District of Columbia isn’t a traditional federal court. It functions similar to a state trial court for Washington, D.C. The complaint seeks profits earned through the alleged deceptive practices.
Additionally, the suit seeks restitution to harmed consumers and to prohibit the company from continuing the conduct.
A Polymarket official told Politico the company is “constantly evaluating ways to improve how we’re engaging and earning the trust of our audience.”
The original Journal article also pointed to influencers referencing the use of inside information when trading. This comes after several cases of alleged insider trading on the platform in recent months.
A representative told the Wall Street Journal that Polymarket “prohibits trading based on stolen information, illegal tips, or information obtained in breach of a duty of trust, confidentiality, or other legal obligation.”
The company added that “Polymarket’s market integrity framework includes trade monitoring, on-chain transparency, reporting channels, and escalation processes to detect, review, and respond to suspicious activity. Where appropriate, we engage with regulators and law enforcement to support the integrity of our markets.”
The lawsuit comes as the industry has billed itself as different from traditional betting. The distinction is the center of a jurisdictional battle between the Commodity Futures Trading Commission (CFTC) and state gambling regulators. That has included back-and-forth lawsuits involving Kalshi with state gaming regulators in court.
The CFTC has sued New York as well as taking similar actions against Arizona, Connecticut, and Illinois.
