New York and Illinois Crack Down on Insider Trading in Prediction Markets by State Employees

Two major U.S. states have moved swiftly to prevent government workers from exploiting confidential information for financial gain in the rapidly expanding prediction market sector.

New York Governor Kathy Hochul and Illinois Governor J.B. Pritzker signed nearly identical executive orders this week prohibiting state employees from leveraging nonpublic information obtained through their official duties to place wagers on prediction markets. Hochul's directive came Wednesday, followed by Pritzker's order on Tuesday.

Legal Challenge to Platforms

The executive orders arrive amid broader state-level efforts to challenge prediction market operators. New York Attorney General Letitia James filed a lawsuit against cryptocurrency platforms Coinbase and Gemini just one day before Hochul's announcement, alleging the companies are offering unregistered gambling schemes within the state. Multiple states—including Massachusetts, Tennessee, and Nevada—have pursued similar legal action against prediction market platforms.

Illinois has likewise initiated legal proceedings against these platforms on comparable grounds.

Federal Regulatory Standoff

The Trump administration has defended the prediction market platforms, contending they operate under federal jurisdiction and should be regulated by the Commodity Futures Trading Commission (CFTC) rather than state authorities. Hochul directly challenged this position in her executive order, asserting the CFTC lacks the authority to oversee these markets and has failed to implement adequate safeguards against insider trading misconduct.

"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 in the order.

The governor further criticized federal regulators for neglecting enforcement actions while simultaneously blocking states from exercising oversight.

Global Incidents Fuel Concerns

Recent high-profile cases have intensified scrutiny of insider trading within prediction markets worldwide. In February, two Israeli individuals with military connections were arrested and charged with placing bets on the timing of a military operation against Iran the previous summer. January brought another controversy when a Polymarket trader earned hundreds of thousands of dollars by accurately predicting details surrounding a U.S. military operation in Venezuela, triggering misconduct allegations.

California Governor Gavin Newsom implemented a similar ban on state employee prediction market trading last month, explicitly linking the measure to ethical concerns within the Trump administration.