California Governor Gavin Newsom has signed an executive order that immediately bars gubernatorial appointees from using confidential or non-public information obtained through their official duties to place bets on prediction markets, including platforms such as Polymarket and Kalshi. The order also prohibits appointees from helping spouses, family members, business partners, or associates profit from such information.
The move makes explicit that California’s existing conflict-of-interest standards apply to prediction markets, a fast-growing category of event-based trading venues where users stake real money on binary outcomes tied to elections, military developments, economic decisions, and other real-world events. While the order does not appear to ban public officials from using these platforms altogether, it draws a clear line around insider knowledge gained in government service.
A Direct Response to Ethical Concerns
Newsom framed the decision as a public ethics measure, saying public service should not become a “get-rich-quick scheme.” His office also presented the order as a contrast to what it described as ethical failures at the federal level. The California action comes as scrutiny over prediction-market trading has intensified in 2026, especially around markets linked to geopolitics and government actions.
According to the report, several high-value trades have fueled concerns about possible insider activity. In one example, six accounts reportedly earned $1.2 million by betting on a U.S. strike against Iran, with funds deposited days before the event and wagers placed only hours ahead of it. Another trader, described as having a 93% win rate on Iran-Israel related markets, reportedly made nearly $1 million since 2024. In a separate case, a bettor allegedly collected a $410,000 payout after placing tens of thousands of dollars on the U.S. capture of Venezuelan President Nicolás Maduro shortly before the event occurred.
These episodes have sharpened concerns that prediction markets may be vulnerable to exploitation by people with access to sensitive information, especially when contracts relate to military action, national security, or official policy decisions.
What the Executive Order Covers
The California order extends existing ethics rules directly to prediction-market activity. It prohibits gubernatorial appointees from using information that is not available to the public to personally profit on these platforms. It also bars them from indirectly monetizing such knowledge by assisting others in placing profitable trades.
Importantly, the order does not impose a blanket prohibition on all market participation by officials. Instead, it targets trading based on non-public information connected to government roles. That distinction matters because prediction-market operators often argue that their platforms are regulated financial tools rather than traditional gambling products.
No new enforcement mechanism was detailed in the order beyond California’s existing ethics statutes. As a result, potential violations would likely be handled under conflict-of-interest rules and laws that prohibit the use of public office for private gain.
Platforms Respond as Scrutiny Builds
The order lands at a time when prediction markets have expanded rapidly, helped in part by a broader regulatory posture from the Commodity Futures Trading Commission (CFTC). Platforms such as Polymarket and Kalshi allow users to buy and sell shares in yes-or-no outcomes, with the value of those shares tied to the eventual real-world result.
Kalshi responded quickly, stating on X that it already bans insiders and announcing additional technological controls designed to block politicians and athletes from trading in relevant markets. Polymarket, according to the source material, updated its market integrity rules earlier in the same week, though it had not issued a direct statement on California’s order as of Friday.
The issue is not theoretical. The report notes that more than $10 million has been wagered across Polymarket and Kalshi on the 2026 California gubernatorial race. Newsom, who is term-limited, cannot run again. Even so, election-related markets have drawn enough attention that at least two former candidates were reportedly found betting on their own odds, with one facing platform penalties.
Part of a Broader Regulatory Push
California’s action fits into a broader wave of state and federal attention on prediction-market integrity. At the federal level, Senator Adam Schiff of California and Senator John Curtis of Utah have introduced legislation targeting prediction contracts tied to government actions and military events. Separately, Representative Seth Moulton has banned his own staff from using prediction markets.
That growing pressure reflects a deeper policy debate. Supporters of prediction markets argue that these venues are useful information-aggregation tools and should be treated as regulated financial instruments under existing CFTC oversight. Critics counter that when markets are built around sensitive political or military outcomes, the temptation and opportunity for insider abuse become much harder to ignore.
California’s executive order does not settle that debate, but it does signal that public-sector ethics rules are being updated to match the realities of an increasingly liquid and visible event-trading ecosystem. By explicitly applying conflict-of-interest standards to prediction markets, the state is attempting to close a gray area before it becomes a larger scandal.
For the industry, the message is clear: growth is attracting attention, and attention is bringing tighter scrutiny. For public officials, the message is even clearer: access to non-public government information cannot be turned into an edge on markets that profit from real-world events.