Regulatory trends in prediction markets are taking a new turn. A New York State Assembly member is planning to push a new legislative proposal focused on insider trading issues in prediction markets.

The key prohibition in this proposal is straightforward: federal elected officials, political appointees, and administrative staff are not allowed to trade prediction market contracts linked to government policies or political outcomes based on non-public material information they possess or can access through their official duties.

In simple terms, it aims to close the loophole that allows the exploitation of public authority and informational advantages for arbitrage in prediction markets. This reflects an increasing concern from regulators about the risks associated with prediction markets as their scale expands. For participants in prediction markets, such policy developments are worth paying close attention to — they directly impact the compliance framework and future development prospects of prediction markets.