New York and Illinois Impose Strict Bans on State Employee Participation in Prediction Markets

Governors Hochul and Pritzker have signed executive orders prohibiting state workers from engaging in prediction market trading, citing concerns over insider trading and ethical governance.

New York Governor Kathy Hochul has enacted an executive order barring state employees from participating in prediction markets, mirroring action taken by Illinois Governor JB Pritzker just days earlier. The measures represent a significant regulatory response to mounting concerns about potential market manipulation and illicit insider trading within the rapidly expanding prediction market sector.

Governors Call Out Lack of Federal Oversight

Hochul criticized the Trump administration and Republican members of Congress on Wednesday for permitting what she characterized as an "ethical Wild West" in prediction markets without establishing adequate safeguards against insider trading. "Getting rich by betting on inside information is corruption, plain and simple," Hochul stated, emphasizing that "our actions will ensure that public servants work for the people they represent, not their own personal enrichment."

Pritzker echoed similar sentiments in his Tuesday announcement, declaring that "Illinois is doubling down on its commitment to a transparent and ethical government by bolstering its current state laws to prevent insider trading amid the rapid growth of online prediction markets and event-based gambling contracts."

Market Growth Accelerates Amid Regulatory Concerns

Prediction market adoption has surged dramatically, with monthly trading volumes climbing for seven consecutive months to reach a record $23.6 billion in March. These platforms now facilitate wagering on diverse outcomes spanning sports, elections, financial performance, and cultural events.

The explosive growth has intensified scrutiny regarding potential abuses. Hochul's executive order referenced multiple suspected insider trading incidents involving U.S. military operations. Notably, a Polymarket trader reportedly placed a low-probability wager that Venezuelan President Nicolás Maduro would be removed from office mere hours before his capture by American forces, securing approximately $400,000 in profits. Additional suspicious trading activity was documented surrounding the potential invasion of Iran and the death of Supreme Leader Ayatollah Khamenei in late February.

Enforcement and Consequences

Under Hochul's order, violations may trigger employee dismissal and criminal referrals to law enforcement. The directive further stipulates that state employees and officials are prohibited from facilitating others' profits derived from confidential information through prediction market participation.

Prediction market platforms have independently pursued enforcement measures. In February, Kalshi banned a former California gubernatorial candidate who had wagered $200 on his own political campaign. The enforcement action reportedly targeted Kyle Langford, a former Republican turned Democrat currently seeking election to the U.S. House representing California's 26th District.

Regulatory Battles Intensify Nationwide

The new executive orders reflect broader state-level efforts to regulate prediction markets. The New York State Gaming Commission issued a cease-and-desist letter to Kalshi in October, alleging the platform operated an unlicensed mobile sports wagering service in violation of state law.

Kalshi is simultaneously engaged in litigation with Nevada's Gaming Control Board after a lower court temporarily halted the platform's operations in the state. Nevada regulators contend that Kalshi's contracts constitute unlicensed gambling. Coinbase Chief Legal Officer Paul Grewal has suggested the Nevada case may eventually reach the U.S. Supreme Court, potentially establishing significant legal precedent for how prediction markets and event-based derivatives are regulated federally.