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New Development: Expanded Ban
California's governor Gavin Newsom signed an executive order banning state appointees with insider information from betting on prediction markets, and extends the ban to spouses, family members, and former business partners, taking effect immediately.
“Public service should not be a get-rich-quick scheme. At a time when Trump’s Washington is riddled with ethical failures and insider profiteering, California is drawing a bright line.”
Newsom framed the move as a moral stand against 'get-rich-quick' public service.
The policy references cases where insiders profited from U.S. strikes on Iran and the Maduro arrest timing.
It signals a state-level escalation ahead of federal legislation aimed at restricting prediction-market trading by government insiders.
Policy specifics & scope
The order covers 'gubernatorial appointees' and their close associates, prohibiting use of confidential information to profit from prediction markets.
It also bars using information to help others—like spouses or partners—from profiting.
Newsom's office highlighted instances such as six suspected insiders who profited from Iran strikes and a $410,000 bet placed hours before Maduro's arrest.
Industry responses show Kalshi and Polymarket tightening their own rules in response to scrutiny.
Federal regulation context
Democrats have introduced federal bills—the BETS OFF Act and the PREDICT Act—to bar insiders from betting on prediction markets.
“one bipartisanship proposal introduced in the House this week prohibits members of Congress, the president and others across Washington from taking part in prediction markets related to political events or policy decisions.”
The bills would prohibit the President, lawmakers, and others from wagering on political events or sensitive events like war, with penalties and revenue implications.
Critics argue such restrictions could curb insider advantages, while supporters frame it as essential integrity guardrails in rapidly evolving prediction platforms.
Industry response & enforcement
Industry reactions emphasize that insiders have already faced tighter controls.
Kalshi frames insider trading as against policy and asserts enforcement.
Polymarket has publicly tightened its own guidelines and surveillance.
Newsom’s move has been echoed by lawmakers, who cite high-profile bets as evidence that timing and access to non-public information can distort markets and policy outcomes.
Broader significance & next steps
Newsom’s order adds to a broader ethics crackdown around prediction markets and insider trading, with explicit references to Iran and Venezuela-related bets in the administration’s disclosures.
“Prediction markets have come under scrutiny from US lawmakers, who argue that political insiders are using the platforms to unfairly benefit from their positions and are potentially threatening national security by wagering on sensitive events like war and elections.”
Cointelegraph notes lawmakers’ concerns that insiders may exploit confidential information in sensitive events, while The Block highlights the ongoing push toward tighter surveillance and limits on participants.
The move also aligns with domestic political dynamics, as Democrats argue for stronger controls amid a surge of congressional scrutiny.