Arizona’s Katie Hobbs is the latest state governor to issue an executive order to ban government employees from insider trading on prediction markets.
Hobbs announced on Thursday an executive order that prohibits executive branch employees from disclosing or using nonpublic government information to profit on prediction markets, or to help others to do so. The order also officially designates all nonpublic information obtained during public service that could be used for wagers as confidential.
Violators could be fired and referred to law enforcement.
“Arizonans deserve a state government that works for them, not one where insiders exploit public service for their own gain,” said Hobbs in a press release. “I’m proud to set clear, commonsense ethical standards on prediction markets to hold our government accountable. Public service is a privilege, and we will not tolerate anybody abusing that privilege to line their own pockets.”
Hobbs also encouraged other Arizona elected officials and other authorities, as well as the judicial and legislative branches, to follow suit with similar policies.
Insider trading concerns top of mind
The statement from Hobbs’ office referenced media reports and federal indictments that have suggested that government employees in other parts of the U.S. have used insider information to win millions of dollars wagering on government actions, including international military operations.
The order itself cited specific examples, including U.S. Army member Gannon Ken Van Dyke’s alleged use of classified information to earn more than $400,000 on Polymarket trades on Venezuelan President Nicolas Maduro’s future in office, other alleged instances on Polymarket’s global platform.
California Gov. Newsom took similar step
Hobbs is not the first state governor who has felt the need to issue an executive order addressing insider trading on event contracts.
Her order broadly replicates what California Gov. Gavin Newsom did in that state in March, when he took an existing statewide ban on government officials using or sharing nonpublic information for insider trading purposes and extended it to also apply to prediction markets.
“The ban further extends these prohibitions to prevent appointees from using insider information to help others, including spouses, children, other family members, business partners, or others, profit from such information,” said Newsom’s office.
Arizona is fighting Kalshi in court
While Hobbs has concerned herself with insider trading on prediction markets, other Arizona officials are embroiled in a court fight with Kalshi over sports markets.
Kalshi sued Arizona Attorney General Kristin Mayes and Arizona Department of Gaming (ADG) Director Jackie Johnson in federal court in March, alleging that actions such as Johnson’s previous cease-and-desist order to the company proved there was a “substantial risk” that Mayes would pursue enforcement action against Kalshi on behalf of the ADG.
Almost immediately afterward, Mayes did just that, filing the first criminal lawsuit brought against Kalshi by a state authority. The AG asked a state court to hit the company with 20 misdemeanor charges, writing in the lawsuit that Kalshi offers a range of “bets” on professional and college sports, state and federal elections, and more without a license, in violation of state law.
In May, however, Kalshi secured a temporary reprieve in Arizona when a federal district court judge reversed a decision to deny the prediction market a preliminary injunction against the state, determining that Kalshi is “likely to succeed on the merits” of the case.
