California has moved to restrict insider trading on prediction markets, with Governor Gavin Newsom signing an executive order that takes effect immediately. The order prohibits state public officials and political appointees from using confidential information to generate personal profits through prediction markets. Newsom framed the measure as a defense of ethical public service, stating that such service should not function as a path to personal enrichment.
The order extends beyond the officials themselves, also barring them from sharing inside information with family members, business partners, or spouses who might use it to trade on prediction markets. Newsom drew a direct contrast with the current federal administration, asserting that those in President Donald Trump‘s circle are exploiting confidential government information for personal financial gain. He stated that California would not tolerate that form of corruption within its own ranks.
The executive order arrives amid growing concern among Democratic lawmakers over the intersection of prediction markets and insider trading. Earlier this month, Democratic members of Congress introduced the BETS OFF Act, a proposed federal law that would ban prediction markets centered on war and certain other sensitive topics. Supporters of the bill argue that individuals connected to the Trump administration have profited from such markets using non-public information.
Representative Greg Casar of Texas, speaking at the time of the bill’s introduction, argued that government officials and well-connected individuals should not be permitted to profit from secret information that is meant to serve the public interest. The legislation reflects a broader Democratic push to address what lawmakers describe as systemic ethical failures at the federal level. Newsom’s order aligns California with that effort at the state level.
Several high-profile incidents have fueled the scrutiny surrounding prediction market integrity. In January, a user on Polymarket placed trades just hours before the capture of Venezuelan leader Nicolás Maduro, generating more than $430,000 in profits and prompting allegations of insider trading. Separately, two Israeli nationals were arrested for trading on Polymarket using classified military information they had obtained in advance.
Additional cases have emerged outside the political sphere. A video editor working for the YouTube personality MrBeast was fined and suspended by prediction platform Kalshi, and subsequently fired from Beast Industries, after using inside knowledge about video content to place trades on associated markets. These incidents have drawn attention to the vulnerability of prediction platforms to abuse by those with privileged access to information.
The two leading prediction market platforms have begun responding to the mounting regulatory pressure. Polymarket has updated its market integrity rules, while Kalshi has introduced preemptive screening measures designed to prevent politicians from placing trades on markets linked to their own decisions or areas of authority. Both companies appear to be taking steps to get ahead of further legislative or executive action as oversight of the sector intensifies.
Originally reported by Decrypt.
