California Bans Government Officials From Using Insider Knowledge To Bet On Prediction Markets

Authored by Dylan Morgan via The Epoch Times,

California Gov. Gavin Newsom on Friday issued an executive order banning state officials from using insider knowledge to profit, or assist another person in profiting, on prediction markets, effective immediately.

The governor’s office said there have been mounting reports of individuals in the federal government with access to sensitive government information placing well-timed bets ahead of major Trump administration actions. These reports are currently allegations and have yet to be verified.

“Public service should not be a get-rich-quick scheme. 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,” Newsom said.

“We’re not going to tolerate this kind of corruption in California.”

Prediction markets are platforms that allow users to bet on real-world events, including government decisions, political events, sports, pop culture, and everything in between.

The governor’s office said that, in one example, six suspected insiders made $1.2 million betting on a U.S. strike against Iran from accounts funded only days before the strike and bet only hours before it occurred.

The governor’s office also said another person has made nearly $1 million from a 93 percent win rate on bets related to Iran and Israel.

In a separate incident, an individual made more than $400,000 betting on the U.S. military capturing former Venezuelan leader Nicolás Maduro just hours before that occurred, according to the governor’s office.

Kalshi, one of the largest prediction market platforms, said on X in response to Newsom’s order that it already enforces insider trading violations and that these examples by the governor’s office took place on a separate, unregulated prediction market.

“Insider trading violates our rules, and we enforce them when we catch insiders,“ Kalshi said in a statement.

“Government employees should be aware that trading on federally regulated markets using material non-public information violates the law.”

Last week, on March 23, a bipartisan pair of senators went after the gambling side of prediction markets. Sens. John Curtis (R-Utah) and Adam Schiff (D-Calif.) introduced legislation aimed at banning sports betting through these platforms.

Curtis said in a statement that the measure is needed to protect state authority over gambling laws. He said the rapid expansion of these platforms exposes young people to gambling-like products that should fall under state, not federal, oversight. The legislation, he said, is intended to reaffirm states’ rights, protect consumers, and keep speculative financial products out of areas traditionally regulated as gambling.

Kalshi opposes the bill. Its spokesperson Elisabeth Diana told The Epoch Times in an emailed statement that banning sports-related prediction markets would backfire by pushing users to unregulated offshore platforms.

“It’s clear this bill is motivated by casino interests that are threatened by competition,” she said.

“They’re more worried about protecting their monopolies than protecting consumers.”

Diana said regulated prediction markets are a fairer alternative to traditional gambling because they don’t disadvantage successful users, and that competition—not protection of existing industries—should determine their future.