NY, Illinois curb insider betting on prediction markets

New York Governor Kathy Hochul and Illinois Governor J.B. Pritzker this week issued directives to limit insider betting on prediction markets, directing state ethics agencies and attorneys general to tighten rules that bar public officials and others with privileged state information from trading on political or policy outcomes.

The orders ask state agencies to draft enforceable regulations, expand disclosure requirements for officials, and coordinate with prosecutors to pursue violations tied to elections, legislation and regulatory decisions.

In New York, the governor’s office told the state Commission on Ethics and State Integrity to develop regulations that would classify certain prediction-market wagers as prohibited insider trading when they rely on information obtained through public office. The directive calls for mandatory reporting of market trades by senior executive-branch staff and asks the attorney general to evaluate civil penalties where appropriate. New York officials also said they will explore technical steps such as restricting access to state databases that could feed trading and recommending registration requirements for platforms operating in the state.

In Illinois, the governor’s office requested guidance within 60 days from the Illinois State Board of Elections and the Executive Ethics Commission on trades by elected officials, staff and contractors. The proposal would broaden the definition of “official action” in state ethics law to include decisions likely to move market prices, require recusal when officials or immediate family members hold related market positions, and permit subpoenas for trading records from prediction-platform operators.

Both states plan to seek cooperation from federal regulators where jurisdiction overlaps, referencing securities and commodities statutes that could apply to large-scale market operations. The statements do not propose an outright ban on prediction markets; they focus on preventing trading based on nonpublic government information and increasing transparency for trades connected to public decision-making.

Enforcement tools described in the directives include expanded disclosure rules, civil fines, potential criminal referrals in cases of deliberate deception, and administrative sanctions for state employees who violate ethics rules. State investigators said they will request trading histories and account information from market operators and may require platforms to use identity verification and surveillance measures to detect suspicious activity.

Prediction markets let users buy and sell contracts tied to future events, such as election outcomes, legislative votes and regulatory decisions. Supporters say the markets can aggregate information about likely outcomes. Critics have raised concerns about the risk of trading based on confidential government information and the potential for manipulation.

State lawyers will review whether existing insider-trading frameworks and procurement rules cover prediction-market risks or whether new legislation is needed to create explicit offenses related to these activities.