SACRAMENTO, Calif. — California Governor Gavin Newsom signed an executive order Friday prohibiting state officials from using non-public information to place bets on predictive markets, a move aimed at preventing insider trading and addressing growing concerns about ethical lapses in emerging financial technologies. The order, effective immediately, extends existing California conflict-of-interest laws to cover these markets, where users wager on the outcomes of future events ranging from elections to geopolitical events and economic indicators.
The directive comes as predictive markets, platforms allowing users to bet on future events, have gained traction, and scrutiny. Recent reports of substantial profits made by traders seemingly acting on non-public information have fueled calls for greater regulation. The governor’s office framed the action as a necessary step to maintain public trust and ensure fairness, particularly in contrast to what they characterized as ethical shortcomings at the federal level. The core principle, Newsom stated, is simple: “Public service should not be a system for getting rich quick.”
The executive order specifically prohibits officials from leveraging confidential or non-public information obtained through their official duties for personal financial gain on these platforms. It also extends this prohibition to family members, spouses, business partners, and staff. While the order doesn’t outright ban state officials from participating in predictive markets, it sharply restricts their ability to profit from privileged access to information.
Concerns Over Insider Trading Fuel Action
The move by Newsom follows a series of high-value trades on predictive markets that have drawn national attention. Several accounts reportedly earned $1.2 million betting on a potential U.S. Attack against Iran, with funds deposited days before the event and bets placed hours prior, according to reports. These activities have raised questions about the potential for abuse and the need for stricter oversight.
Further fueling concerns, one trader with a 93% success rate on Iran-Israel related events reportedly earned nearly $1 million since 2024. Another individual profited by $410,000 after betting tens of thousands of dollars on the capture of Venezuelan President Nicolás Maduro by U.S. Forces, just before it occurred. These instances, while not definitively proven as insider trading, prompted a closer look at the regulatory landscape surrounding these markets.
Expanding Regulatory Scrutiny
The growth of predictive markets has coincided with increased attention from the Commodity Futures Trading Commission (CFTC). The CFTC has expanded its regulatory position on these platforms, recognizing them as a legitimate, albeit evolving, financial instrument. Platforms like Polymarket and Kalshi operate as exchanges where users buy shares representing “yes” or “no” outcomes, with payouts tied to real-world events.
Kalshi proactively responded to the governor’s order, posting on X (formerly Twitter): “The odds are 100%, Governor. Because Kalshi already bans insiders.”
The odds are 100%, Governor. Because Kalshi already bans insiders. https://t.co/wJq9wJq9wJ
— Kalshi (@Kalshi) March 29, 2026
The company also announced new technological controls to prevent politicians and athletes from trading in relevant markets. Polymarket updated its market integrity rules earlier this week but had not issued a direct statement regarding the California order as of Friday.
Federal Action and Broader Implications
California’s action is part of a growing wave of scrutiny at both the state and federal levels. At the federal level, Senators Adam Schiff (D-CA) and John Curtis (R-UT) have introduced legislation targeting predictive contracts related to government actions and military events. Representative Seth Moulton (D-MA) has separately prohibited his staff from using predictive markets.
The governor’s office emphasized the contrast between California’s approach and perceived ethical lapses in Washington, D.C., directly referencing former President Trump. Newsom wrote on X, “While Donald Trump continues to enrich himself while in office, California will stand against corruption.”
The order does not outline specific enforcement mechanisms beyond existing California ethics statutes. Violations would likely fall under existing laws related to conflicts of interest and the misuse of public office for private profit. Over $10 million has been wagered on the 2026 California gubernatorial race on Polymarket and Kalshi, with at least two former candidates reportedly betting on their own odds, resulting in sanctions from the platforms.
The California order arrives as the debate over the regulation of predictive markets continues. Proponents argue they are valuable tools for forecasting and risk assessment, while critics raise concerns about manipulation and the potential for unfair advantages. The CFTC maintains that its current oversight is sufficient, but the growing calls for stricter regulation suggest a changing landscape.
The next step in this evolving regulatory environment will be the potential passage of federal legislation and further action by the CFTC. California’s move is likely to add momentum to these efforts, prompting other states to consider similar measures. The long-term impact on the predictive markets industry remains to be seen.
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