New York and Illinois have enacted executive orders this week banning state employees from using nonpublic information obtained through their jobs to trade on prediction markets. The moves come as both states intensify their legal challenges against these platforms, which they classify as illegal gambling operations.
New York Governor Kathy Hochul signed the order on Wednesday, applying to all state employees. Illinois Governor J.B. Pritzker signed a nearly identical order on Tuesday, covering employees under his jurisdiction. These actions follow lawsuits filed by New York Attorney General Letitia James against crypto exchanges Coinbase and Gemini for offering prediction market trades in the state, alleging they constitute unregistered gambling schemes.
In her order, Hochul criticized federal regulators, specifically the Commodity Futures Trading Commission (CFTC) under the Trump administration, for failing to establish rules to prevent insider trading in the sector. "Despite the proliferation of wagering opportunities now facilitated by these companies, federal regulators have not to date required any meaningful ethical standards relating to conduct on these markets, including protections against insider trading," Hochul wrote.
The crackdown is part of a broader trend, with states including Massachusetts, Tennessee, and Nevada also taking legal action against prediction market platforms. Meanwhile, the federal government has defended the platforms, arguing they should be regulated by the CFTC, not state gambling laws.
Separately, prediction market platform Kalshi disclosed enforcement actions against three political candidates for betting on their own elections, a practice it termed "political insider trading." The individuals include U.S. Senate hopeful Mark Moran, who was fined $6,300 and banned for five years. Moran had previously backed a meme coin as part of his pro-crypto campaign. Other candidates, Matt Klein and Ezekiel Enriquez, received similar bans and smaller fines.
These developments occur amidst growing global scandals involving insider trading on prediction markets, including cases in Israel and related to U.S. military actions, prompting increased regulatory scrutiny from Democratic lawmakers.
