California Governor Gavin Newsom signed an executive order on Friday, barring his political appointees from using non-public information to place bets on prediction markets such as Polymarket and Kalshi, or from assisting others in doing so. The order takes effect immediately, extending California's existing conflict-of-interest laws directly to the rapidly growing prediction market industry.
Key Provisions of the Order
The order prohibits appointees from using confidential or non-public information obtained through their official duties for personal gain on these platforms. It also bans aiding family members, spouses, business partners, or related individuals in placing profitable bets using such information. In a statement, Newsom said: "Public service should not be a get-rich-quick scheme. While Trump's Washington is riddled with ethical failures and insider profiteering, California is drawing a clear line: if you serve the people as a political appointee, you serve the people—period."
High-Value Trades Under Scrutiny
The executive order follows a series of suspicious high-value trades in early 2026. Six accounts reportedly profited $1.2 million by betting on U.S. military strikes against Iran; funds were deposited days before the event and bets placed hours prior. Another trader has maintained a 93% win rate on Iran-Israel related events since 2024, accumulating nearly $1 million in profits. A different bettor earned $410,000 after placing tens of thousands of dollars on the U.S. arrest of Venezuelan President Nicolás Maduro shortly before it occurred.
Prediction markets have expanded rapidly following the Commodity Futures Trading Commission (CFTC)'s broader regulatory stance. Platforms like Polymarket and Kalshi operate as betting exchanges where users buy "shares" in binary yes/no outcomes.
Industry Response and Federal Actions
Kalshi responded preemptively on X, stating: "100% chance, 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 directly commented on California's order as of Friday. Notably, over $10 million has been wagered on the 2026 California gubernatorial race across Polymarket and Kalshi. Newsom is term-limited and cannot run; at least two former candidates were caught betting on themselves, with one facing platform penalties.
At the federal level, Senators Adam Schiff (D-CA) and John Curtis (R-UT) have introduced legislation targeting prediction contracts related to government actions and military events. Representative Seth Moulton (D-MA) separately banned his own staff from using prediction markets.
Enforcement and Controversy
The order does not outline a specific enforcement mechanism beyond existing California ethics laws; violations likely fall under conflict-of-interest statutes and laws against "misuse of public office for private gain." Newsom confirmed the signing on X, writing: "While Donald Trump continues to enrich himself in office, California will stand against corruption." The measure joins a growing list of state and federal actions pressuring the industry. Prediction market platforms argue they are regulated financial tools, not gambling, and that existing CFTC oversight is sufficient.