In brief
- California public officials are banned via executive order from using inside information to make money on prediction markets.
- The ban extends to state officials and appointees using information to help others from profiting, as well.
- The order follows continued scrutiny from Democratic lawmakers that have claimed Trump insiders are profiting from proximity.
California is joining the crackdown on prediction market insider trading.
Democratic Governor Gavin Newsom signed an executive order, effective immediately, that prohibits public officials and decision-makers in the state from using inside information to profit via prediction markets.
“Public service should not be a get-rich-quick scheme,” said Newsom in a statement.
“At a time when Trump’s Washington is riddled with ethical failures and insider profiteering, California is drawing a bright line: If you serve the public as a political appointee, you serve the public—period,” he said, adding that his state wouldn’t “tolerate this kind of corruption.”
The move also prohibits appointees and officials from using inside information to help others—like children, spouses, and business partners—to profit from inside information.
Newsom’s executive order comes amid increasing scrutiny surrounding insider trading and prediction markets, particularly from Democrats. Earlier this month Democratic lawmakers introduced the BETS OFF Act, a federal bill that would ban prediction markets focused on war and other specific topics.
Those types of markets, the lawmakers claim, have been profited on by those close to the Trump administration. Newsom, too, highlighted concerns that those in President Trump’s “orbit are exploiting confidential information for their own personal gain.”
“We shouldn’t live in a country where government officials or well-connected people can make money off of secret information that is supposed to be used in the public interest,” Rep. Greg Casar (D-TX) said at the time of the BETS Off Act’s introduction.
Both highlighted the events surrounding the January capture of Venezuelan leader Nicolas Maduro, where the suspicious timing of a user’s trades—just hours before intervention—led to more than $430,000 in profits on Polymarket and allegations of insider trading.
Insider trading issues have been apparent elsewhere ,as well. Two Israelis were arrested for making trades on Polymarket using inside information they had about military secrets. Plus, a video editor for MrBeast was fined and suspended by Kalshi—and later fired from his job at Beast Industries—for using inside information to trade markets about what the YouTube personality would say in videos.
The platforms are aware of the implications, especially as legislation and executive orders start to pile up. This week, the two major startups took steps to address issues related to insider trading, with Polymarket improving rules on market integrity while Kalshi implemented preemptive screening to ensure that politicians can’t make trades on associated markets.