California Governor Gavin Newsom has taken a hardline stance against corruption by signing an executive order that prohibits appointed state officials from using insider information to bet on prediction markets. The order, which took effect immediately on March 27, 2026, specifically bans "gubernatorial appointees from using confidential information obtained through their roles to place bets or assist others, including family members or business partners, in profiting from prediction market activity."
Governor Newsom announced the measure on social media, stating: "I’m signing an executive order banning California state officials from using insider information to place bets, including in prediction markets. We will not tolerate this kind of corruption in California." He emphasized that "public service should not be a get-rich-quick scheme," drawing a contrast with former President Donald Trump's practices.
The California action comes amid growing federal scrutiny. Lawmakers in Congress have introduced the PREDICT Act, which would ban members of Congress, federal officials, and their families from trading event contracts tied to political events, policy decisions, and government actions. Violators would be required to forfeit all profits to the U.S. Treasury and pay an additional 10% fine.
This regulatory push follows reports of suspiciously timed large bets on platforms like Polymarket and Kalshi, particularly around U.S. military actions in Venezuela and Iran, which have netted suspected insiders millions of dollars. The Commodity Futures Trading Commission (CFTC) has already sanctioned operators on platforms like Kalshi for similar practices.
In response to these concerns, major prediction market platforms Polymarket and Kalshi have rolled out new restrictions and surveillance measures this week. These include limits on participants with direct influence over outcomes and expanded rules on insider trading and market manipulation.
The prediction market sector has experienced explosive growth, with The Block reporting that Kalshi and Polymarket surpassed $20 billion in combined monthly trading volume for the first time in March 2026, marking a seventh consecutive record high. California's executive order represents a significant step in establishing ethical frameworks for these rapidly growing blockchain-based derivatives markets and sets a precedent for other states.
