California Bans Insider Trading on Prediction Markets

California added a new ethics restriction on Friday as prediction markets face more pressure in the United States. Governor Gavin Newsom signed an executive order that bars gubernatorial appointees from using nonpublic information to profit on platforms such as Kalshi and Polymarket.

Good to Know

• The order also bars officials from helping family members, business partners, or others trade on insider information.
• California said the rule builds on existing conflict-of-interest laws already in place.
• Kalshi said insider trading is already banned under its rules.

California Tightens Prediction Market Rules

Newsom tied the order to reports that government insiders may have profited from event contracts linked to military and political developments. His office pointed to trading tied to Venezuela, Iran, and drug cartel-related events.

“Public service should not be a get-rich-quick scheme,” Newsom said in a statement released by his office. “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. We’re not going to tolerate this kind of corruption in California.”

One example from the governor office involved six suspected insiders who allegedly bought $1.2 million in contracts on a U.S. strike against Iran after funding accounts days earlier and placing trades shortly before settlement.

For Kalshi and Polymarket, the timing adds to a wider regulatory fight around prediction markets, insider trading, and event contracts. Both platforms have already added rules meant to limit insider participation.