California Governor Gavin Newsom issued an executive order on Friday that bars state officials from using "non-public information" to profit on prediction market platforms.
A national ban is already being considered following a string of accurate high-value bets made shortly before major events, particularly around economic decisions and U.S. military actions.
The California order goes into effect immediately and prohibits "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."
"Public service should not be a get-rich-quick scheme," Newsom tweeted on Friday. "While Donald Trump continues to enrich himself in office, California will stand up against corruption."
Similar concerns are also being voiced in Congress, with lawmakers from both sides of the aisle introducing the PREDICT Act earlier this week.
The proposal would ban members of Congress, federal officials, and their families from trading event contracts tied to "the outcomes of political events, policy decisions, and other government actions."
Violators would be forced to turn over all profits to the U.S. Treasury and pay a 10% fine on top.
This comes as stories pile up about suspiciously timed large bets made on U.S. military strikes in Venezuela and Iran have netted suspected insiders millions of dollars.
Top market players Polymarket and Kalshi are also moving to address these issues. The platforms rolled out new restrictions and surveillance measures this week that include limits on participants with direct influence over outcomes and expanded already existing rules on insider trading and market manipulation.
Prediction market platforms have grown enormously in the past year, with no signs of slowing. According to The Block data, Kalshi and Polymarket surpassed $20 billion in combined monthly trading volume for the first time this month, marking a seventh consecutive record high.
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