This week, New York and Illinois have joined a growing number of states in prohibiting government employees from leveraging insider information to trade on prediction markets, as concerns about these emerging platforms escalate. On Tuesday, Illinois Governor J.B. Pritzker enacted an executive order mirroring one signed by New York Governor Kathy Hochul the following day, both targeting state workers under their jurisdictions.
This legislative action follows a lawsuit initiated by New York against cryptocurrency firms Coinbase and Gemini for offering prediction market trades within the state. Attorney General Letitia James argued these platforms are facilitating unregistered gambling schemes. Over the past year, states from across the political spectrum—including Massachusetts, Tennessee, and Nevada—have pursued similar legal actions.
Illinois has also engaged in legal proceedings against these markets. Meanwhile, the Trump administration advocated for the prediction market platforms, asserting their exemption from state gambling laws and advocating for federal regulation by the CFTC.
Governor Hochul’s executive order criticized the Trump-era CFTC, questioning its authority over such markets. She noted that even if it possessed regulatory jurisdiction, it has not implemented significant rules to curb insider trading within this sector.
“Despite the expansion of betting options via these companies, federal regulators have yet to mandate substantial ethical standards for market conduct or institute protections against insider trading,” Hochul remarked. “Furthermore, they have sought to prevent states from assuming oversight responsibilities over gambling activities on these platforms.”
Recent scandals involving government employees exploiting insider information in prediction markets have become international headlines. Notably, two Israelis with military connections were apprehended in February for allegedly betting on an anticipated attack on Iran. In January, a trader profited significantly by accurately predicting details of the U.S. strike on Venezuela, sparking allegations of unethical behavior.
Earlier this month, California Governor Gavin Newsom enacted a similar prohibition against state employees using insider information to trade on prediction markets, linking the decision to ethical misconduct claims within the Trump administration.