California Governor Gavin Newsom signs an executive order expanding restrictions on public officials and those connected to them from profiting through insider trading on prediction markets tied to political or economic events. The order specifically targets individuals who may have access to confidential information through their official roles. Newsom framed the move as a matter of public trust, stating that public service should not function as a means of personal financial gain.
The order prohibits gubernatorial appointees — officials appointed to office by the governor — from using confidential or non-public information obtained through their duties to profit from related prediction markets. The restrictions extend beyond the officials themselves to include their spouses, family members, and former business partners. This broader scope is intended to close potential loopholes that could allow insiders to route profits through close associates.
Newsom’s office cited several examples of political insiders allegedly exploiting non-public information on prediction platforms. Among the cases referenced were six suspected political insiders who reportedly profited from prediction markets tied to US strikes on Iran. A separate incident from January was also highlighted, in which a trader on Polymarket earned $410,000 by betting that the US would arrest former Venezuelan leader Nicolás Maduro hours before his actual capture.
Prediction markets have drawn increasing scrutiny from federal lawmakers, who argue that political insiders are exploiting these platforms in ways that provide unfair advantages and may pose national security risks. Concerns center on the ability of well-positioned individuals to wager on sensitive events such as military operations and elections. The California order reflects a growing effort at the state level to address gaps that federal regulation has yet to fill.
At the federal level, Texas Congressman Greg Casar and Connecticut Senator Chris Murphy introduced the Banning Event Trading on Sensitive Operations and Federal Functions (BETS OFF) Act in March 2026. The bill is a direct response to allegations of insider trading on prediction markets and seeks to prohibit government insiders from using such platforms to profit from markets connected to war or death. The legislation signals bipartisan concern over the issue at the national level.
Separately, US Representative Adrian Smith and Representative Nikki Budzinski introduced the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading (PREDICT) Act, also in March. That proposal would bar the US President, members of Congress, and other senior government officials from placing bets on prediction markets. Together, the two federal bills represent a coordinated legislative push to regulate how public officials interact with these platforms.
The overlapping state and federal efforts highlight the urgency with which policymakers are approaching the issue of prediction market integrity. As these platforms grow in prominence, the question of how to prevent those with privileged access to sensitive information from exploiting them remains unresolved. The outcome of the pending federal legislation, alongside Newsom’s state-level action, is expected to shape the regulatory landscape for prediction markets in the months ahead.
Originally reported by CoinTelegraph.
