California Bans Prediction Market Insider Trading

California Governor Gavin Newsom signed an executive order Friday banning gubernatorial appointees from using confidential information to profit on prediction markets.

The order targets markets tied to political or economic events that officials can influence or access through their positions. Newsom said public service should not be a get-rich-quick scheme. The ban extends to spouses, family members, and former business partners of appointed officials.

The executive order follows a Polymarket trader netting ₱24,824,517 ($410,000) in January betting on the arrest of Venezuelan President Nicolás Maduro by U.S. forces. Six suspected political insiders also profited from U.S. strikes on Iran. Newsom said Trump's Washington is riddled with ethical failures and insider profiteering, and California is drawing a bright line against corruption.

Congress moved to address prediction market insider trading with two separate bills introduced in March. Texas Congressman Greg Casar and Connecticut Senator Chris Murphy co-introduced the BETS OFF Act, which prohibits government insiders from wagering on markets tied to war or death. U.S. Representatives Adrian Smith and Nikki Budzinski co-introduced the PREDICT Act, which prohibits the President, lawmakers, and high-ranking government officials from betting on prediction markets.

The CFTC issued an advisory in February asserting full authority to police illegal trading practices on prediction markets, including fraud and manipulation. CFTC Rule 180.1 under the Commodity Exchange Act has been used in enforcement actions for insider trading in commodities markets and could apply to prediction markets. Legal experts say it remains unclear if prediction market bets qualify as securities under the Securities Exchange Act of 1934, which prohibits insider trading in securities under the Securities Exchange Act of 1934.