New York, Illinois sign EOs banning state employees from prediction markets

New York Governor Kathy Hochul has signed an executive order banning state employees from betting on prediction markets, following a similar move by Illinois earlier this week.

“Getting rich by betting on inside information is corruption, plain and simple,” Hochul said on Wednesday, adding: “Our actions will ensure that public servants work for the people they represent, not their own personal enrichment.”

Hochul also slammed the Trump administration and congressional Republicans for allowing an “ethical Wild West” to take hold around prediction markets without implementing any “meaningful ethical standards” to protect against insider trading.

Adoption in prediction markets is rapidly accelerating, with monthly trading volumes rising over the last seven consecutive months to an all-time high of $23.6 billion in March, with markets covering everything from sports and elections to financial results and cultural outcomes.

However, the rise has been accompanied by increasing concerns about insider trading and market manipulation.

Illinois Governor JB Pritzker also signed an EO banning state employees from betting on prediction markets on Tuesday, stating:

Insider trading accusations in prediction markets

Hochul’s EO made reference to several suspected insider trading instances involving US military action. 

One of them was a Polymarket trader who placed a low-odds bet that Nicolás Maduro would be ousted as Venezuelan president just hours before he was captured by US forces, profiting around $400,000.

Another related to suspicious trades placed on the invasion of Iran and the death of its Supreme Leader, Ayatollah Khamenei, in late February. 

Hochul’s EO stated that any violation may result in dismissal and law enforcement action, and also noted that New York state employees and officers cannot assist others in profiting on confidential information through prediction markets.

Prediction markets, meanwhile, have been fighting potential insider traders their own way. 

In February, Kalshi said it banned a former contender for governor of California after he had bet $200 on his own candidacy last year.

Kalshi did not name the politician. However, details in the enforcement summary align with public posts by Kyle Langford, a former Republican turned Democrat who is now running for election to the US House representing California’s 26th Congressional District.

Related: Charles Schwab, Citadel Securities are eying prediction markets

Kalshi faces regulators in Nevada and New York 

The latest EO adds to a wave of action from US states to attempt to police prediction markets. 

The New York State Gaming Commission sent prediction market platform Kalshi a cease-and-desist letter in October for illegally operating an unlicensed mobile sports wagering platform in the state.

Kalshi is also engaged in a court battle with the Nevada Gaming Control Board after a lower court temporarily blocked Kalshi from operating in the state, with the regulator arguing that Kalshi’s contracts facilitate unlicensed gambling. 

Coinbase chief legal officer Paul Grewal has predicted that the case could reach the US Supreme Court, potentially creating precedent over the regulatory treatment of prediction markets and event-based derivatives.

Magazine: How to fix suspected insider trading on Polymarket and Kalshi