Key Highlights
- California Governor Gavin Newsom banned state officials from using insider information to bet on prediction markets.
- Kalshi confirmed its rules already block insiders from trading on markets related to their work, aligning with the new executive order.
- The order cites cases where insiders allegedly profited from U.S. military actions in Venezuela and Iran.
California Governor Gavin Newsom signed an executive order today that prohibits state officials and appointed decision-makers from using private information to make bets on prediction markets.
According to the order, the rules take effect immediately. It also prevents officials from helping family members, spouses, children, or business partners make money from such information.
“All gubernatorial appointees are strictly prohibited from using any non-public information obtained due to their public service to personally profit or assist another person,” Newsom said, adding that California would not tolerate corruption in public office.
Prediction markets and order effect
Prediction markets are websites or platforms that allow people to trade contracts based on the results of real-world events.
For example, someone can bet on who will win an election, what a government decision will be, or the ongoing conflict in the Middle East. Kalshi and Polymarket are two of the biggest prediction markets in the United States. Polymarket uses cryptocurrency to make trades, and both are regulated by the U.S. Commodity Futures Trading Commission (CFTC).
The order stops California officials from using secret government information to make bets or give advice that could help someone else profit on these markets.
Growing concern about insider trading
The order comes amid growing concern over insider trading in prediction markets. Last week, Democratic lawmakers introduced the BETS OFF Act, a federal bill that would ban markets focusing on war and other government actions.
Lawmakers said some people close to the Trump administration have used these markets to make money from secret information.
Representative Greg Casar (D-TX), one of the lawmakers who introduced the law, said, “America is facing a crisis of corruption, and today’s bill is about cracking down on one of the most dangerous new forms of corruption infecting our government. He added, “Too often, prediction markets are becoming yet another place for rich and powerful people to cash in on insider information. This bill will put a stop to that.”
Several incidents have also been reported on these platforms. In January, an anonymous trader on Polymarket made nearly $500,000 by betting that the U.S. would take Venezuelan President Nicolás Maduro into custody, an event that occurred hours later.
Other cases include two Israelis arrested for using secret military information to trade on Polymarket and a video editor for MrBeast, who was fined and suspended by Kalshi for trading based on inside knowledge of the YouTube videos.
Prediction markets update to new rules
In effect, Newsom’s order strengthens ethics rules for California officials, making clear that insiders cannot use confidential information to make money for themselves or others.
Kalshi had already responded to earlier scrutiny by implementing measures to prevent political candidates and government insiders from placing bets that could create conflicts of interest. Polymarket has also updated its rules to stop trades made using stolen confidential information or illegal tips.
Also Read: Prediction Markets Face Scrutiny as U.S. Senators Introduce New Bill
