In brief
- New York and Illinois banned government employees from using insider information to trade on prediction markets.
- The moves come as both states challenge prediction markets they say constitute illegal gambling platforms.
- Officials also criticized federal regulators for failing to police insider trading in the fast-growing sector.
New York and Illinois became the latest states to ban government employees from using insider information on prediction markets this week, as the United States rushes to adapt to risks posed by the novel trading platforms.
On Wednesday, New York Governor Kathy Hochul signed an executive order banning all state employees from using nonpublic information obtained in their job to make wagers on prediction markets. A near-identical executive order was signed Tuesday by Illinois Governor J.B. Pritzker, applying to state employees under his jurisdiction.
The move comes just a day after New York sued crypto giants Coinbase and Gemini for offering prediction market trades in-state. New York Attorney General Letitia James said the platforms are offering wagers that constitute illegally unregistered gambling schemes. Over the last year, states of all political persuasions—from deep-blue Massachusetts, to red Tennessee, to purple Nevada—have sued prediction market platforms for the same reason.
Illinois has also taken legal action against prediction markets, making similar claims.
The Trump administration, meanwhile, has aggressively come to the defense of the prediction market platforms themselves—which claim they are exempt from state gambling laws and should instead be regulated at the federal level by the CFTC.
In today’s executive order, Hochul took aim at the Trump CFTC, arguing it has no standing to regulate prediction markets. Further, she added, even if the regulator did have such jurisdiction, it has failed to establish meaningful rules to prevent rampant insider trading in the new 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.
“Nor,” she continued, “have they undertaken any meaningful enforcement actions to prevent insider trading, but they have instead focused on precluding states from exercising oversight authority over the gambling undertaken on these platforms.”
In recent months, scandals related to government employees profiting from insider information on prediction markets have spread across the world. In February, for instance, two Israelis with military ties were arrested and accused of placing bets on the timing of a planned attack on Iran last summer. In January, a Polymarket trader pocketed hundreds of thousands of dollars after correctly guessing the details of the United States’ attack on Venezuela, prompting accusations of misconduct.
Last month, California governor Gavin Newsom similarly banned state employees from prediction market trading using insider info, tying the move to allegations of ethical misconduct within the Trump administration.