NY, Illinois Ban Government Employees From Insider Trading on Prediction Markets

In near-simultaneous actions, New York Governor Kathy Hochul and Illinois Governor J.B. Pritzker issued executive orders prohibiting state employees from engaging in prediction market trading based on insider knowledge gained in the course of their official duties. Hochul’s order, signed Wednesday, bars “all state employees from using nonpublic information obtained in their job to make wagers on prediction markets,” while Pritzker’s order, signed a day earlier, applies the same restriction across Illinois state government employees.

The moves come amid mounting concern that lightly regulated prediction markets that allow users to bet on outcomes ranging from elections to geopolitical events are vulnerable to insider trading and other forms of market abuse. They also reflect growing frustration among state officials with what they view as a regulatory vacuum at the federal level.

Hochul was explicit in her criticism of federal oversight, particularly the Commodity Futures Trading Commission (CFTC), which has asserted jurisdiction over many prediction market platforms. “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,” she wrote in the executive order. “Nor… have they undertaken any meaningful enforcement actions to prevent insider trading, but they have instead focused on precluding states from exercising oversight authority.”

Related: Federal Appeals Court Sides With CFTC on Jurisdiction Over Prediction Markets

The ethical crackdown follows a series of high-profile incidents that have raised alarms globally. As detailed by Decrypt, traders have allegedly profited from advance knowledge of military actions and geopolitical developments, including a case involving individuals accused of betting on the timing of an attack on Iran and another in which a trader reportedly earned hundreds of thousands of dollars by correctly predicting details of a U.S. operation in Venezuela .

New York’s action is also part of a broader enforcement push against prediction market operators. Hochul’s executive order comes one day after Attorney General Letitia James filed lawsuits against Coinbase and Gemini, alleging that their offerings constitute unregistered gambling schemes under state law. Illinois has taken similar legal positions, joining a bipartisan wave of state-level challenges to platforms such as Polymarket and Kalshi.

These state initiatives are unfolding against the backdrop of an escalating jurisdictional battle with the federal government. The Department of Justice and the CFTC recently filed lawsuits against Illinois, Arizona and Connecticut, arguing that state efforts to regulate prediction markets violate federal law by encroaching on the CFTC’s “exclusive jurisdiction over event-contract markets.”

CFTC Chairman Michael Selig framed the issue in stark terms, warning against a fragmented regulatory landscape. “The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” he said, adding that Congress rejected “a fragmented patchwork of state regulations” because it increases risk and undermines consumer protection.

For now, the executive orders in New York and Illinois represent a targeted intervention focused on public-sector ethics rather than market structure. But they signal a broader willingness by states to act unilaterally where they perceive federal oversight to be lacking, setting the stage for continued legal and political conflict over who ultimately governs the rapidly evolving prediction markets ecosystem.