California Governor Enacts Order to Prevent Insider Trading in Prediction Markets

California Governor Gavin Newsom has taken steps to address growing concerns over insider trading in prediction markets by signing an executive order prohibiting state officials from using insider information to bet on these markets. The order takes effect immediately and applies to gubernatorial appointees, preventing them from using non-public information for personal gain or to assist others.

The move comes amid increased scrutiny of prediction markets, which allow users to trade contracts based on real-world events. Recent incidents have highlighted the potential for insider trading, with some individuals allegedly profiting from secret government information. Last week, Democratic lawmakers introduced the BETS OFF Act, a federal bill that would ban markets focusing on war and other government actions.

Polymarket and Kalshi, two major prediction market platforms, have already implemented measures to prevent insider trading. Polymarket uses cryptocurrency for trades, while Kalshi has updated its rules to stop trades made using stolen confidential information or illegal tips. The order strengthens ethics rules for California officials and makes clear that insiders cannot use confidential information to make money for themselves or others.