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Governor Hochul Signs Executive Order Banning State Employees From Insider Trading on Prediction Markets
By David Carlucci
A quiet executive order from Governor Kathy Hochul has put a spotlight on something most New Yorkers have probably never heard of: prediction markets. The order does not ban them. What it does is draw a clear line around state government employees and what they are allowed to do with information they learn on the job.
Using information gained through public service to make money on markets, before the rest of the public knows what is happening, is a breach of the trust on which the government depends.
To understand why that matters, it helps to understand what prediction markets are, and why they have suddenly become one of the most contentious regulatory fights in the country.
Think of them as betting platforms, except instead of wagering on a sports game, users buy and sell contracts tied to real-world events. Will the Federal Reserve raise interest rates? Will there be a government shutdown? Who will win a Senate race? People place money on these outcomes, and the price of a contract at any given moment reflects what the crowd believes is likely to happen. The events being bet on range from major ones like military conflict outcomes or election results, to surprisingly trivial ones, like bets on what a public official will wear or how many social media posts a specific person will make. Supporters say these platforms are useful forecasting tools. Critics say they look a lot like gambling and can be manipulated by people who know things the public does not.
That last concern is no longer hypothetical.
Earlier this month, federal prosecutors charged a U.S. Army soldier who helped plan the operation to capture Venezuelan President Nicolas Maduro. He allegedly used classified intelligence to bet $33,000 on Polymarket that the raid would happen, then cashed out roughly $400,000 when it did. In the final hours of the Biden administration, an anonymous Polymarket trader netted roughly $300,000 by correctly predicting four specific pardons the outgoing president would issue before leaving office. Closer to home, traders on Kalshi bet $138 million related to last year’s New York City mayoral election. These are not abstract concerns. Real money is changing hands based on information that ordinary people do not have access to.
Executive Order No. 60, signed April 22, is New York’s direct response to that reality. It prohibits state officers and employees from using nonpublic information gained through their official duties to profit or avoid losses on prediction markets, and bars them from passing that information to others who might benefit. Think of a state health official who knows a major policy announcement is coming, or a budget director with advance knowledge of emergency spending. The order says that kind of inside knowledge cannot become a personal financial advantage.
New York is not acting alone, and the timing matters. Illinois Governor JB Pritzker signed a nearly identical executive order one day earlier, on April 21, and both orders took effect immediately. Attorney General Letitia James filed a lawsuit against Coinbase and Gemini in state court in Manhattan, seeking to bar both companies from operating in New York unless they obtain licenses from the state Gaming Commission. Last October, the state Gaming Commission had already sent a cease-and-desist letter to Kalshi, accusing the company of running an unlicensed mobile sports wagering service. The executive order is one piece of a much larger, ongoing effort.
The reason states are moving on their own is not hard to understand. The federal agency responsible for regulating these markets, the Commodity Futures Trading Commission, has seen its workforce shrink by 24 percent since President Trump returned to office, raising serious questions about its ability to police insider trading and protect consumers. At the same time, Donald Trump Jr. is a paid adviser to both Kalshi and Polymarket, and the president’s own social media company has announced plans to launch its own prediction platform. The state senator who has been leading New York’s legislative push on this issue said flatly that he does not trust the federal government to police these markets. That skepticism is shared by a growing number of state officials across the country.
The platforms themselves have not been idle. Kalshi suspended three political candidates from its platform after an internal investigation found they had bet on their own campaigns. Both Kalshi and Polymarket have announced voluntary restrictions barring politicians from trading on their own races and employees from trading on contracts tied to their employers. Kalshi’s own spokesperson said Governor Hochul’s executive order “makes sense,” acknowledging that insider trading already violates the company’s rules. That response is notable. It suggests the platforms understand the concerns are real, even as the broader legal fight continues.
There are reasonable arguments on both sides of this debate. Some contend that patchwork state rules create uncertainty for a still-developing industry. Others say waiting for Washington to act is not a responsible option when the agency responsible for oversight is shrinking, and the people closest to the White House have financial stakes in the industry’s success.
Beneath all of it, the core principle behind New York’s executive order is straightforward. State employees work for the public. Using information gained through public service to make money on markets, before the rest of the public knows what is happening, is a breach of the trust on which the government depends. That standard is not new. The marketplace it now applies to is.
David Carlucci consults organizations on navigating government and securing funding. He served for ten years in the New York Senate
