SACRAMENTO, United States, March 27 (Xinhua) -- California Governor Gavin Newsom on Friday signed an executive order barring gubernatorial appointees from using non-public information to profit from online prediction markets amid rising scrutiny of insider betting on platforms such as Polymarket and Kalshi.
The order, which took effect immediately, also prohibits appointees from sharing insider information to benefit third parties, including family members and business partners.
The action followed what the governor's office described as a pattern of well-timed wagers by individuals with apparent access to sensitive federal government information. The office cited four incidents in its official statement to substantiate the order.
In one case, an unidentified individual reportedly predicted multiple U.S. military actions related to Venezuela, Iran and anti-drug operations, earning tens of thousands of dollars. In another, six suspected insiders made a combined 1.2 million U.S. dollars by betting on a U.S. military strike against Iran from accounts opened only days before the strike.
Separately, a trader cited by CNN achieved a 93 percent success rate on wagers linked to Iran and Israel, earning nearly 1 million dollars since 2024. In another case, a trader reportedly gained about 410,000 dollars from a bet placed hours before U.S. forces captured Venezuelan President Nicolas Maduro.
In a statement, Newsom said public service should not be used for personal gain. "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."
The order extends California's existing ethics framework. The California Fair Political Practices Commission says state law already stops officials from having financial interests in decisions made while they are doing their official jobs.
The executive action coincided with a flurry of federal legislative activity targeting prediction market platforms. Senators Adam Schiff, a Democrat from California, and John Curtis, a Republican from Utah, introduced the "Prediction Markets Are Gambling Act" on Monday, which would bar the U.S. Commodity Futures Trading Commission (CFTC) from authorizing prediction contracts related to sports and return regulatory oversight to individual states.
Senators Jeff Merkley of Oregon and Elizabeth Warren of Massachusetts, both Democrats, and Representative Jamie Raskin of Maryland, a Democrat from Maryland, also introduced legislation the same week to bar elected officials from using prediction markets. Their proposal would additionally require the Government Accountability Office to study insider trading on prediction market platforms.
Industry response was swift. Kalshi pushed back on social media platform X, writing that "the odds are 100 percent" that the platform already bans insiders, using the probability language of the prediction market industry to suggest the order was redundant as applied to its operations.
Polymarket had separately updated its insider trading guidelines days earlier, rewriting rules to prohibit trading where users might possess confidential information or influence event outcomes.
The CFTC, the primary federal regulator for prediction markets, has publicly signaled support for Kalshi in legal disputes with states seeking to restrict platform operations, according to U.S. media reports.
Donald Trump Jr., the eldest son of U.S. President Donald Trump, holds investments in Polymarket and serves as a strategic adviser to Kalshi, the same reports noted. ■