Beta
    Regulation

    Three Governors in 30 Days: The State Crackdown on Prediction Market Insider Trading

    California, Illinois, and New York banned state employees from trading prediction markets on insider information within 30 days. Here's what each executive order covers, what triggered the wave, and who's likely next.

    By PredictionMarkets.usSunday, April 26, 20269 min read

    California, Illinois, and New York banned state employees from trading prediction markets on insider information within 30 days. Here's what each executive order covers, what triggered the wave, and who's likely next.

    In the space of 30 days, the governors of three of the largest U.S. states each signed an executive order targeting the same thing: government employees using nonpublic information to profit on prediction markets.

    California Governor Gavin Newsom went first, on March 27. Illinois Governor JB Pritzker signed his order on April 21. New York Governor Kathy Hochul followed the very next day, April 22, with what her office called a "nation-leading executive order."

    None of them were reacting to confirmed wrongdoing by their own staff. All three cited the same general concern: that the rapid growth of platforms like Kalshi and Polymarket has created a new and largely unregulated avenue for insider trading — and that waiting for federal action means waiting too long.

    Together, the three executive orders represent the clearest state-level consensus to date on how to handle prediction market ethics. And with New Jersey and Massachusetts flagged as likely next signers, the trifecta may soon become a quintet.

    California: The First Mover (March 27, 2026)

    California moved on March 27 — not in response to any confirmed incident involving state employees, but because Governor Newsom's office was watching the federal picture closely.

    The order, announced via the official Governor's website, expanded California's existing ethics rules to explicitly cover prediction markets. All gubernatorial appointees are now prohibited from using "any non-public information" acquired through their official duties to personally profit from prediction market platforms, or to help any other person — including spouses, children, other family members, and former business partners — profit using that information.

    "Public service should not be a get-rich-quick scheme," Newsom said 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."

    The order cited mounting concerns about traders at the federal level allegedly placing well-timed bets ahead of major Trump administration actions — military operations, tariff moves, and foreign policy decisions. While those bets, if they occurred, would involve federal rather than California state officials, Newsom framed his order as a preemptive guardrail.

    California's EO covers gubernatorial appointees specifically — a narrower scope than what Illinois and New York would later adopt. But it established the legal template: prediction markets are now explicitly covered by state ethics law, not just inferred to be covered by general conflict-of-interest statutes.

    Illinois: Extending the Prohibition to All State Employees (April 21, 2026)

    Three weeks and three days after California, Governor JB Pritzker signed Illinois Executive Order 2026-04 — and went further.

    Where California focused on appointees, Illinois Executive Order 2026-04 covers "any Illinois state employee, officer, appointee or board member of any state agency." That's a substantially broader universe, sweeping in career civil servants and state authority members alongside political appointees.

    "This opens the door to insider trading and abuse of confidential information," Pritzker said in a statement published by NPR Illinois. "While the Trump Administration continues to be riddled with stories of appointees looking to make a profit, Illinois is stepping up to ensure those who are serving the public, not their own personal financial gain."

    Illinois law already prohibited current and former elected officials from using confidential information to gain for themselves or others. But EO 2026-04 strengthened those protections in response to what Pritzker's office called the specific risks created by prediction market apps — platforms that let users bet on outcomes that state employees may be positioned to influence or know about in advance.

    Among the examples cited by Pritzker's office: highly accurate bets placed in February regarding U.S.-Israel strikes on Iran; the Maduro trader who earned more than $400,000 after betting on the Venezuelan president's removal ahead of a U.S. capture mission; and a user who placed a $40,000 bet that OpenAI would launch an AI web browser before the end of a specific month. The Pritzker EO also has no sunset clause, making it a permanent addition to Illinois ethics law.

    New York: The Third State in 30 Days (April 22, 2026)

    Governor Kathy Hochul signed Executive Order No. 60 on April 22, 2026 — the day after Illinois, completing what has become a three-state trifecta in under 30 days.

    Hochul's order covers "state officers and employees serving at the Governor's pleasure" as well as "appointed public-authority members." Under EO No. 60, those covered are forbidden from using confidential information acquired in the course of their official duties to further their personal financial interests through prediction markets. They are also barred from assisting others — including family members — in profiting on confidential information through these platforms. Violations are subject to dismissal, sanctions, and law enforcement referral.

    The New York EO is notable for its explicit citations. Unlike California's broader framing around federal-level concerns, Hochul's order specifically named three examples: the $400,000 Maduro bet; what the order described as "more than $1 billion in 'perfectly-timed' bets surrounding the ongoing war in Iran, including the location and timing of military strikes and the status of the Strait of Hormuz"; and the previous New York State Gaming Commission cease-and-desist letter sent to Kalshi in October 2025 for allegedly operating an unlicensed mobile sports wagering platform.

    "Getting rich by betting on inside information is corruption, plain and simple," Hochul said. "Our actions will ensure that public servants work for the people they represent, not their own personal enrichment."

    New York Deputy Communications Director Sean Butler noted that "there are no known instances of this behavior to date" involving New York state employees — reinforcing that the EO is prophylactic, not reactive.

    What the Three Executive Orders Actually Ban

    Reading the three EOs together, a consistent framework emerges — even as the scope of coverage differs:

    California (March 27)Illinois (April 21)New York (April 22)
    Covered personsGubernatorial appointeesAll state employees, officers, appointees, board membersOfficers/employees at Governor's pleasure + public authority members
    Core prohibitionUsing nonpublic information to profitUsing nonpublic information to betUsing confidential information acquired in official duties
    Third-party prohibitionFamily, former business partnersAnyone, regardless of relationshipFamily members and others
    Penalty languageExisting ethics enforcementExisting procurement prohibitionsDismissal, sanctions, law enforcement referral
    TriggerFederal insider concernsFederal insider concernsFederal insider concerns + NY Gaming Commission action
    Sunset clauseNot specifiedNoneNot specified

    The core prohibition is functionally the same across all three: you cannot use what you know from your government job to bet on prediction markets, and you cannot help anyone else do it either. The differences lie in who is covered (appointees only vs. all state employees) and how penalties are structured.

    Prediction markets — platforms where users trade contracts on the outcomes of real-world events, including military actions, elections, economic decisions, and more — are regulated at the federal level by the CFTC. Kalshi holds a CFTC Designated Contract Market license. But federal regulation addresses market integrity and financial stability, not the specific conduct of government officials at the state level. Executive orders fill that gap.

    What Triggered the Wave

    The three EOs didn't emerge from nowhere. Several high-profile incidents created the political conditions for this kind of action.

    The Maduro trade: In January 2026, an anonymous trader made more than $400,000 betting on Polymarket that Venezuelan President Nicolás Maduro would be removed from power — placing the bets hours before a U.S. mission to capture Maduro was publicly disclosed, according to reporting by Reuters. The timing raised immediate questions about whether the trader had advance knowledge of the operation.

    Iran bets: In the lead-up to U.S. military actions involving Iran, multiple trading accounts placed what New York's EO characterized as "perfectly-timed" bets on the location and timing of military strikes and the status of the Strait of Hormuz. The NY EO cited these bets — without identifying confirmed insiders — as evidence of the structural risk prediction markets create.

    The Van Dyke arrest: In April 2026, federal prosecutors charged a former U.S. Department of Defense official with the first-ever insider trading case under the Commodity Exchange Act's "Eddie Murphy Rule" — trading on Polymarket using nonpublic government information. The arrest, announced jointly by the CFTC and the Department of Justice, made the theoretical risk concrete. (See our full coverage: CFTC and DOJ's First Prediction Market Insider Trading Case.)

    Federal congressional action: The same week as the California EO, a bipartisan group of U.S. senators introduced the "Public Integrity in Financial Markets Act of 2026" — legislation that would bar the president, vice president, members of Congress, their staff, and federal political appointees from trading prediction markets using inside information. Senators Todd Young (R-IN), John Curtis (R-UT), Elissa Slotkin (D-CA), and Adam Schiff (D-CA) were among its sponsors, per Politico. State governors, watching Congress, moved faster with executive authority that didn't require legislative approval.

    Kalshi, for its part, responded to California's announcement by posting on X: "At Kalshi, insider trading violates our rules, and we enforce them when we catch insiders... Government employees should be aware that trading on federally regulated markets using material non-public information violates the law." The company has emphasized that its federal CFTC-regulated status means federal anti-fraud provisions already apply to trades on its platform.

    The State-Level Pattern: Why Governors Moved Faster Than Legislatures

    Executive orders don't require legislative majorities, committee hearings, or floor votes. They take effect immediately upon signing. For governors who wanted to act on prediction market ethics during a politically heated moment — with the Trump administration under scrutiny and a federal government perceived as slow-moving — EOs were the obvious tool.

    All three orders leaned heavily on existing state ethics frameworks rather than creating new law. California "expanded" its existing conflict-of-interest rules. Illinois "strengthened" existing procurement prohibitions. New York "built on" its Code of Ethics. None required entirely new statutory authority; they simply applied established ethics principles to a new venue — one that didn't exist in meaningful form when those ethics statutes were first written.

    This approach has a limitation: executive orders can be rescinded by a successor governor, and they typically cover narrower universes than comprehensive legislation. The California order covers appointees only, not career state employees. An ethics-violating mid-level state health department analyst who bets on pharmaceutical approvals they're reviewing would likely fall outside California's EO — while being squarely inside Illinois's.

    What's Next: Who Signs Next, and What Comes After

    The Specter of more state executive orders is real. New Jersey Governor Phil Murphy and Massachusetts Governor Maura Healey have been identified by observers as likely next signers, based on the alignment of their states' active litigation stances on prediction market regulation and their Democratic gubernatorial profiles.

    Beyond individual state EOs, there are three parallel tracks that will shape the regulatory picture:

    1. Federal legislation: Congress is moving on multiple bills targeting prediction market insider trading. The bipartisan Public Integrity in Financial Markets Act of 2026 has Senate sponsors from both parties. Whether it passes is an open question; that it exists signals that prediction market regulation is no longer a niche issue.

    2. Platform self-regulation: Both Kalshi and Polymarket have updated their internal policies in response to the scrutiny. Kalshi announced new guardrails in March 2026 blocking politicians, athletes, and others from trading in certain markets. These are voluntary measures enforced by the platforms themselves.

    3. CFTC rulemaking: The CFTC issued ANPRM (Advanced Notice of Proposed Rulemaking) that opened a public comment period on prediction market rules. The comment deadline is April 30, 2026. Whatever rules emerge from that process will represent the first comprehensive federal regulatory framework for these markets.

    For state employees wondering whether their jurisdiction has adopted rules: as of April 26, 2026, the confirmed states with explicit executive orders covering prediction market insider trading are California, Illinois, and New York. No state has passed legislation; these are all executive orders, each narrower than a state statute would be.

    FAQ

    Are these executive orders the same as laws? No. Executive orders are directives from a governor that apply to state executive branch employees and agencies. They do not have the same force as legislation passed by a state legislature, and they can be rescinded by a future governor. However, they are enforceable within their scope and carry real penalties — including dismissal and law enforcement referral in New York's case.

    Do these orders ban all prediction market trading by state employees, or just insider trading? Specifically insider trading — using nonpublic information gained from official duties to profit, or helping others do so. Regular prediction market trading (on topics unrelated to a state employee's official responsibilities, using only publicly available information) is not addressed by these orders. The orders target the specific harm of inside information flowing into prediction markets.

    Does this apply to federal employees? No. State executive orders cannot bind federal employees; those are separate jurisdictions. Federal employees are subject to federal ethics rules and, for trades on CFTC-regulated markets, to anti-fraud provisions of the Commodity Exchange Act. The Van Dyke case was a federal prosecution under federal law, not a state EO.

    What platforms are covered? The executive orders generally reference "prediction markets" or "predictive markets" without specifying platforms. All three governors cited Kalshi and Polymarket as examples. Any platform offering prediction market-style contracts would be covered by the plain language of the orders.

    What happens if a state employee violates one of these orders? Consequences vary by state. California and Illinois lean on existing ethics enforcement mechanisms. New York's EO No. 60 is the most explicit: violations can result in dismissal, sanctions, and referral to law enforcement.

    Sources & Verification

    Back to Articles

    Related Articles

    Regulation

    CFTC Proposes Formal Rules for Prediction Markets: What Gets Banned, What Survives

    The CFTC published a Notice of Proposed Rulemaking today establishing a framework for which event contracts can trade—and which face prohibition. Here is what traders need to know.

    8 minJun 10, 2026
    Regulation

    STOP Corrupt Bets Act: The Federal Bill That Would Ban Sports, Election, and War Contracts on Kalshi and Polymarket

    Senator Merkley and Rep. Raskin's STOP Corrupt Bets Act (S. 4226) would ban prediction market contracts on sports, elections, war, and government actions — colliding directly with the Trump administration's CFTC.

    11 minJun 2, 2026
    Regulation

    Rhode Island Sues Kalshi and Polymarket: The State Revenue Argument Against Prediction Markets

    Rhode Island filed dueling lawsuits against Kalshi and Polymarket on May 21, 2026, claiming sports event contracts are illegal gambling that has already cut state lottery revenue 8%. Inside the legal battle and what it means for users.

    8 minMay 26, 2026