New York Governor Kathy Hochul has issued an executive order prohibiting state employees from using insider information obtained during their official duties to participate in prediction markets. The order aims to prevent corruption and ensure that public servants prioritize their responsibilities to the public over personal financial gain. Hochul emphasized that the measure is part of New York's commitment to ethical governance, especially as other states, including California and Illinois, have enacted similar bans on insider trading in prediction markets.
Interestingly, this order was not prompted by any known instances of insider trading by New York state employees, according to Sean Butler from the New York State Executive Chamber. Instead, it reinforces existing regulations against insider trading, as the Commodity Exchange Act already prohibits such activities across both public and private sectors.
The move comes amid increasing scrutiny of prediction markets like Kalshi and Polymarket, particularly following high-profile events that raised concerns about potential insider trading related to geopolitical situations. In response to these concerns, both Kalshi and Polymarket have introduced measures to combat insider trading, with Kalshi suspending and fining individuals for violations and enhancing market surveillance. Polymarket has also updated its rules to explicitly prohibit trading based on confidential information.
At the federal level, Congress has introduced legislation aimed at curtailing market manipulation in prediction markets, while the Commodity Futures Trading Commission (CFTC) has stated its commitment to investigating insider trading cases. Despite the heightened focus on these issues, there have been no reported arrests in the U.S. related to insider trading on prediction markets to date.