On March 27, 2026, California Governor Gavin Newsom signed an executive order, effective immediately, barring all gubernatorial appointees from using insider information to place bets on prediction markets such as Polymarket and Kalshi. The order extends California's existing conflict-of-interest statutes directly to these rapidly growing platforms.
Core Provisions of the Order
The order explicitly prohibits appointees from using confidential or non-public information obtained through their official duties to profit personally on prediction markets. It also bans helping family members, spouses, business partners, or associates place profitable bets using such information. “Public service should not be a get-rich-quick scheme,” Newsom stated. “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.”
Background and Notable Cases
Several high-value trades on prediction markets drew national scrutiny in early 2026. Six accounts reportedly made $1.2 million betting on a U.S. strike against Iran, with funds deposited days before the event and bets placed hours prior. A single trader with a 93% win rate on Iran-Israel events earned close to $1 million since 2024. Another bettor collected a $410,000 payout after placing tens of thousands of dollars on the U.S. capture of Venezuelan President Nicolás Maduro shortly before it occurred. These incidents sparked bipartisan calls for regulation.
Industry Responses
Kalshi moved preemptively, posting on X: “The odds are 100% Governor. Because Kalshi already bans insiders.” The company also announced new technological controls this week to block politicians and athletes from trading in relevant markets. Polymarket updated its market integrity rules earlier in the week but had not issued a direct statement on the California order as of Friday. More than $10 million has been wagered on the 2026 California gubernatorial race across Polymarket and Kalshi combined. Newsom is term-limited and cannot run. At least two former candidates were caught betting on their own odds, and one faced platform penalties.
Federal Parallel Actions
At the federal level, Senator Adam Schiff (D-CA) and Senator John Curtis (R-UT) have introduced legislation targeting prediction contracts tied to government actions and military events. Rep. Seth Moulton (D-MA) separately banned his own staff from using prediction markets. Newsom confirmed the signing on X, writing that “while Donald Trump continues to enrich himself in office, California will stand up against corruption.”
Enforcement and Debate
No specific enforcement mechanisms are outlined in the order beyond California’s existing ethics statutes. Violations would likely fall under conflict-of-interest and public-office-for-private-gain laws. Prediction market platforms argue they are regulated financial instruments, not gambling, and that existing CFTC oversight is sufficient. This state-level action adds to a growing list of pressures facing the nascent industry.