California Governor Gavin Newsom has signed an executive order that takes effect immediately, barring gubernatorial appointees from using confidential or nonpublic information obtained through their official duties to profit on prediction markets such as Polymarket and Kalshi.
The order explicitly extends California’s existing conflict-of-interest framework to prediction markets, a sector that has grown rapidly as users wager real money on outcomes ranging from elections to military action and economic decisions. Under the new rules, covered officials are prohibited not only from trading on such information themselves, but also from helping spouses, family members, business partners, or associates place profitable bets based on it.
Response to mounting insider-trading concerns
The move follows a series of controversial prediction-market trades that drew scrutiny in early 2026. According to the report, six accounts reportedly earned $1.2 million betting on a U.S. strike against Iran, with funds deposited days before the event and wagers placed hours ahead of the outcome. One trader with a 93% win rate on Iran-Israel-related events has made nearly $1 million since 2024. Another bettor reportedly captured $410,000 after wagering on the U.S. capture of Venezuelan President Nicolás Maduro shortly before it happened.
Newsom framed the order as an ethics measure, arguing that public service should not be used as a pathway to personal enrichment. His office also cast the action as a contrast to broader concerns about ethical lapses and insider-style profiteering tied to political power.
Not a blanket ban on participation
The executive order does not appear to ban all public officials from using prediction markets outright. Instead, it targets trading based on nonpublic information connected to government roles. In practice, that means ordinary participation is not the focus; the central issue is whether someone is exploiting privileged access gained through public office.
The order also does not create a standalone enforcement mechanism. Any violations would likely be handled under California’s existing ethics, conflict-of-interest, and misuse-of-office laws.
Platforms and federal lawmakers also tightening rules
Kalshi responded publicly by saying insider participation was already prohibited on its platform and announced additional technical controls designed to block politicians and athletes from trading in related markets. Polymarket updated its market-integrity rules earlier in the week, though it had not issued a direct statement on California’s order at the time of publication.
Pressure is also building at the federal level. Senators Adam Schiff and John Curtis have introduced legislation targeting prediction contracts tied to government actions and military events. As state and federal scrutiny increases, the debate over whether prediction markets should be treated primarily as regulated financial instruments or as a form of gambling is likely to intensify. Notably, more than $10 million has already been wagered across Polymarket and Kalshi on California’s 2026 gubernatorial race.