California Governor Gavin Newsom signed an executive order on March 27 barring state public officials and political appointees from using non-public information to profit on prediction markets. The ban also covers using insider knowledge to benefit family members, spouses, and business partners, and takes effect immediately.

"Public service should not be a get-rich-quick scheme," Newsom said, pointing to concerns that Trump administration insiders have exploited confidential information on platforms like Polymarket and Kalshi.

Pattern of incidents

The order follows a string of high-profile allegations. A trader earned over $430,000 on Polymarket just hours before the capture of Venezuelan leader Nicolas Maduro. Two Israeli citizens were arrested for using military intelligence to front-run trades on the platform. A MrBeast video editor was fined and fired after using advance knowledge of YouTube content to bet on Kalshi markets.

Federal lawmakers have also moved — Senate Democrats introduced the BETS OFF Act to restrict war-related prediction markets, citing Trump-orbit profiteering.

Platform responses

Both Polymarket and Kalshi have since taken steps to address the problem: Polymarket updated its market integrity rules, while Kalshi implemented pre-screening to block politicians from trading on directly related markets.

California's is the first state-level executive action targeting prediction market insider trading. The move arrives as Washington state separately sued Kalshi this week on illegal gambling grounds, adding to mounting legal and regulatory pressure across the sector.