Governors ban state employees from insider trading on prediction markets
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By
Chris Teale
More state leaders are either banning or severely curtailing workers from using nonpublic information to profit on the platforms amid worries of wagering on government actions.
Arizona Gov. Katie Hobbs became the latest governor to ban state employees from using nonpublic information amid worries over staff profiting from governmental actions.
Hobbs’ order, signed earlier this month, designates nonpublic information as confidential and forbids staff in the executive branch from using that information to profit, avoid financial loss or assist others in profiting from prediction markets, which includes platforms like Kalshi and Polymarket.
"Arizonans deserve a state government that works for them, not one where insiders exploit public service for their own gain," Hobbs said in a statement. "I’m proud to set clear, commonsense ethical standards on prediction markets to hold our government accountable. Public service is a privilege, and we will not tolerate anybody abusing that privilege to line their own pockets."
It makes Hobbs the latest governor to sign an order banning employees from profiting off inside information on prediction markets. There have been numerous concerns that government employees and officials at various levels have used insider information to benefit, including by trading on whether the U.S. would capture former Venezuela President Nicolas Maduro or invade Iran. In the former instance, the Department of Justice charged a soldier with insider trading after he used classified information to bet on the timing of Maduro’s capture.
So far, four other governors have signed executive orders banning insider trading on prediction markets by government employees. New York Gov. Kathy Hochul was the first to do so in April, an effort she said built on the state’s Code of Ethics to prevent insider trading and corruption. And it came on the heels of the state Gaming Commission sending Kalshi a cease-and-desist letter for operating an unlicensed and illegal gambling platform.
“Getting rich by betting on inside information is corruption, plain and simple,” Hochul said in a statement at the time. “Our actions will ensure that public servants work for the people they represent, not their own personal enrichment.”
Since then, California Gov. Gavin Newsom, Illinois Gov. J.B. Pritzker and North Carolina Gov. Josh Stein have signed similar orders, before Hobbs did the same. All emphasized their robust ethics rules, and looked to contrast it with the federal government and President Donald Trump’s administration. Newsom’s order, for example, noted how “the erratic, and at times self-contradictory, statements and actions by the current federal administration and its failure to enforce any meaningful ethical standards present particularly unique risks of abuse of predictive markets.”
Pritzker’s order, similarly, noted “the increasing emergence of unregulated and unchecked prediction markets and event contracts,” which cover various areas and “[harm] the public interest and undermines the State’s legal and highly regulated gaming markets.” The federal government has so far taken a hands-off approach to regulating prediction markets and has taken legal action against several states that have passed laws or rules on them. Arizona was also notable as it filed criminal charges against Kalshi for running an illegal gambling operation, the nation’s first to do so.
Despite that, governors and state legislatures are looking to act. The National Conference of State Legislatures found that at least 15 states considered legislation on prediction markets during the 2026 legislative year, with several outright banning them, while others looked to restrict minors’ access. A bill in Ohio would limit political officials’ ability to use prediction markets, and it is still pending.
Outside groups have warned that prediction markets must be reined in. An analysis released earlier this month by the Center for American Progress warned they invite national security risks and public corruption, and recommended banning federal officials and employees from participating in them. CAP also called for identity verification to be required for all users, that insider trading laws be strengthened and that executive action be taken to protect classified information.
“The people entrusted with America’s most sensitive information should be protecting it, not profiting from it,” Alexandra Thornton, senior director of financial regulation at CAP and co-author of the issue brief, said in a statement. “When government insiders can bet on military operations or other confidential actions, it creates conflicts of interest that threaten national security and erode public trust. Congress should close these loopholes before another insider turns classified information into personal profit.”