Lawsuit Accuses Polymarket Of Engaging In Deceptive Marketing

Prediction markets have surged in popularity in recent years, but a new lawsuit casts a shadow over one of its prominent players, Polymarket. Filed in the Superior Court of the District of Columbia, the complaint alleges that Polymarket and its key executives orchestrated a deceptive marketing campaign, specifically designed to lure American users, particularly college-aged individuals, into its platform.

The National Association of Consumer Advocates (NACA), a non-profit organization representing consumer interests through its network of over 1,500 attorneys, is behind the legal action. The lawsuit contends that Polymarket deliberately obscured the high probability of bettors losing money. Named in the complaint are Polymarket founder and CEO Shayne Coplan, who allegedly holds "ultimate decision-making authority" over the company's operations and marketing, and Chief Marketing Officer Matthew Modabber, who is accused of personally overseeing the advertising practices now at the heart of the case.

Central to the plaintiffs' claims is the alleged use of a "fake website." The lawsuit asserts that Polymarket paid content creators to record themselves placing bets on simulated versions of the Polymarket site. These videos, the complaint states, were then presented as genuine experiences of ordinary users. Many of these creators were college-aged and reportedly received between $2,000 and $3,000 per month for their involvement.

A _Wall Street Journal_ report corroborated some of these allegations, detailing a review of 1,105 videos from 10 creators linked to Polymarket's marketing vendor. Seventy percent of these videos depicted a creator placing a bet, with on-screen wagers totaling $1.9 million. A staggering 118 videos showcased creators winning nearly $900,000. However, the _Journal_ noted that "a handful of videos the _Journal_ reviewed also contained short glimpses of URLs indicating the sites were test environments for Polymarket engineers." Crucially, none of these bets were real. Had these 118 winning bets been placed with actual money, the creators would have collectively lost over $166,000. Furthermore, almost 25% of the videos used the word "free," framing the supposed wins as effortless money, according to the lawsuit.

The lawsuit also details a practice the NACA describes as "clipping," where social media influencers were paid to create short video clips, post them on accounts designed to appear as ordinary users, and disseminate them across various social media platforms. Attorneys claim these "clippers" were paid approximately $1 for every 1,000 views, with an explicit requirement to target a U.S. audience. The instructions provided to these influencers were allegedly crafted to camouflage advertising as organic content. "Do not make the videos feel like ads or promotions," the complaint quotes from Polymarket's own materials, highlighting the deliberate attempt to disguise promotional content.

The lawsuit and the _Wall Street Journal_ report further allege that Polymarket's marketing firm even prohibited creators from including "Polymarket" or even "poly" in their account names. Influencers were reportedly coached to "warm up" new accounts over several days to ensure social media platforms would perceive them as genuine users. The complaint cites one Polymarket clipping campaign that disbursed $8,892 across 4,700 submissions, generating 9.1 million views. In another instance, a single video, initially garnering only 151 views, was propelled to 2.4 million views through a clipping campaign.

Beyond deceptive practices, the complaint asserts that Polymarket unfairly targeted college-aged consumers with manipulative marketing. This included direct recruiting campaigns on college campuses, offering students up to $2,000 per campaign, and providing fraternities with cash incentives for each new user they signed up. A particularly striking allegation describes an episode where Polymarket invited approximately 20 fraternity brothers from Columbia University to their New York office, provided them with pizza and wings, gave them $10 each to bet, and later awarded them a wooden plaque honoring them as "the first Polymarket Pledge Class." This particular chapter reportedly earned $30,510 in two weeks using a referral code. Messages quoted in the complaint show Polymarket representatives encouraging fraternity leaders, stating the company was "increasing the payout to $15 per user" and coaching members on how to "make bags." Experts have voiced concerns about gambling among younger adults, noting that college students experience gambling problems at roughly twice the rate of the overall U.S. adult population.

The lawsuit, filed in the Superior Court of the District of Columbia – which functions as a state trial court for Washington, D.C. – seeks profits earned through the alleged deceptive practices, restitution for harmed consumers, and an injunction to prevent the company from continuing such conduct. In response, a Polymarket official told _Politico_ that the company is "constantly evaluating ways to improve how we’re engaging and earning the trust of our audience." The _Journal_ article also touched upon influencers referencing the use of inside information in trading, following recent allegations of insider trading on the platform. Polymarket, through a representative, stated it "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 its "market integrity framework includes trade monitoring, on-chain transparency, reporting channels, and escalation processes to detect, review, and respond to suspicious activity," and that it engages with regulators and law enforcement when appropriate.

This lawsuit unfolds amidst a broader jurisdictional battle over prediction markets, which position themselves as distinct from traditional betting. This distinction has led to ongoing legal skirmishes between the Commodity Futures Trading Commission (CFTC) and state gambling regulators, including lawsuits involving Kalshi and actions taken by the CFTC against New York, Arizona, Connecticut, and Illinois over their legal stances against prediction market firms.