Peterson was approved for the benefits along with convicted serial killer Cary Stayner and murderer Isuaro Aguirre, according to the Los Angeles Times.
Now nine district attorneys and a federal prosecutor in the state have urged governor Gavin Newsom to help block unemployment fraud in California prisons.
In a letter to the governor the group called the situation “ the most significant fraud on taxpayer funds in California history,” reports the Los Angeles Times.
The fraud reportedly includes the identity theft of some prisoners and well as individual inmates and organised gangs scamming the system.
Investigators say that more than $400,000 in state benefits have been paid to death row inmates, with more than $140 million to other inmates in the state’s 38 prisons.
Officials say that in total the payments send to those ineligible because of incarceration in prison and jails could eventually reach $1bn.
“The murderers and rapists and human traffickers should not be getting this money,” said Sacramento County district attorney Anne Marie Schubert. “It needs to stop.”
Employment Development Department officials, who handle benefits in California, say that privacy rules mean they cannot confirm the payments to Peterson, Stayner and Aguirre.
Mr Newsom has now launched a task force to fix the issue.
“Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable,” the governor said in a statement.
Officials say that an analysis of Department of Labor data from March to August showed that more than 35,000 inmates had filed claims, with more than 20,000 receiving benefits.
And one inmate received more than $48,000, according to the Los Angeles Times.
Data showed that 133 of California’s death row inmates had made 158 claims, with one receiving more than $19,000.
In order to receive unemployment benefits a claimant must be actively seeking work and able to accept work, which typically rules out most prisoners.
The state of California has paid out $110bn on 9 million claims since the Covid pandemic began in March.
“EDD investigators are busy working with national, state, and local partners to expose, identify, and prosecute offenders to the fullest extent of the law,” the agency said in a statement last month.
Peterson was convicted in 2004 of the murder of wife Laci Peterson and the fetus she carried and he was sentenced to death by lethal injection.
In August, the Supreme Court of California unanimously upheld his conviction but overturned the death sentence against him on the grounds he was not guaranteed an impartial jury.
Prosecutors will now retry the penalty phase of the case and again have asked for the death penalty for Peterson.