WASHINGTON — Democratic lawmakers are pressing regulators to rein in online prediction markets after traders wagered roughly $679 million on contracts tied to the timing of strikes on Iran and whether Iran’s Supreme Leader Ayatollah Ali Khamenei would be removed from power. Critics say the markets risk rewarding people with access to sensitive information and turning war and political violence into a tradable asset, March 3, 2026.
According to a Reuters review of Polymarket and Kalshi markets, about $529 million was placed on a series of Polymarket contracts tied to the timing of attacks, and another $150 million was wagered on contracts tied to Khamenei’s removal — a combined figure that has amplified scrutiny in Washington and across the trading industry.
The concerns intensified after blockchain analytics firm Bubblemaps said six accounts made about $1.2 million in profits from Polymarket bets funded in the hours before Saturday’s strikes. TechCrunch reported that the trading patterns raised fresh questions about whether some bettors were acting on nonpublic information, even as others argue the contracts reflect broader speculation and rumor-fueled trading ahead of major geopolitical events.
Sen. Chris Murphy, D-Conn., called the situation “insane” and said he planned to move quickly on legislation aimed at banning wagers tied to military action. Rep. Mike Levin, D-Calif., also urged “answers, transparency, and oversight,” arguing that markets should not become a vehicle for profiting off advance knowledge of military operations.
A White House spokesman, Davis Ingle, said in an email that “the only special interest guiding the Trump administration’s decision-making is the best interest of the American people,” according to the Reuters report.
Prediction markets and the Iran strike “edge case”
Prediction markets let users buy and sell contracts that pay out based on whether an event happens, with prices moving as traders assess new information. Supporters say the markets can aggregate dispersed knowledge and produce real-time probabilities; critics say the same mechanism can attract traders who believe they have an informational advantage — including, potentially, people with access to confidential details about government decisions, corporate actions or military operations.
Kalshi, which is regulated in the U.S., has said it tries to avoid markets that amount to wagers on deaths. In an email statement described by CBS News, a Kalshi spokesperson said the company does not allow customers to place bets on the death of public figures and included “every precaution” to prevent trading from becoming a direct bet on a violent outcome, including a “death carveout” that resolves the market at the last traded price before a death.
Polymarket, which has operated largely outside U.S. regulatory structures, has argued that prediction markets can provide “accurate, unbiased forecasts” by harnessing the wisdom of crowds. Still, the scale of the Iran-related activity — and the timing of some winning trades — has added momentum to calls for clearer rules and enforcement.
Regulators get dragged deeper into prediction markets
One immediate question is what qualifies as illegal conduct — and who can police it. The Commodity Futures Trading Commission regulates derivatives markets and has increasingly treated certain event contracts as falling within its purview, while states have argued some products resemble gambling.
In a recent CFTC enforcement advisory on prediction markets, the agency highlighted scenarios it said could violate federal commodities law, including trading on material nonpublic information and trading in contracts where a person has direct or indirect influence over the outcome. The advisory cited internal disciplinary actions by Kalshi involving a political candidate trading on his own candidacy and a YouTube editor trading on contracts tied to content he likely knew about before it was public.
Even with guidance, enforcement remains complicated when activity spans offshore platforms, pseudonymous crypto wallets, and fast-moving geopolitical events that can create sudden surges of trading volume.
A longer-running fight over where prediction markets fit
The Iran contracts are the latest flashpoint in a debate that has resurfaced repeatedly as technology has made event wagering easier and more accessible.
More than a decade ago, the popular online market Intrade abruptly shut down after U.S. regulators took aim at its access for American customers; Time reported in 2013 that the closure followed a federal lawsuit tied to unregulated trading activity.
In January 2022, the CFTC ordered Polymarket’s operator to pay a $1.4 million penalty and wind down markets that the agency said did not comply with federal law, underscoring that regulators were willing to pursue enforcement even as blockchain-based trading gained popularity.
And as markets expanded into politics, courts have also been pulled in. The Associated Press reported in 2024 that a federal appeals court allowed betting on U.S. congressional elections to resume temporarily in a case involving Kalshi — a ruling that sharpened arguments over election integrity, manipulation risks and whether certain event contracts should be treated as regulated financial products or prohibited gaming.
Now, lawmakers pushing crackdowns say the Iran markets raise an even starker question: whether platforms should be allowed to list contracts tied to war, regime change or other violence-prone outcomes at all.
For the prediction market industry, the dispute comes at a time of rapid growth and rising mainstream attention — but it also underscores the risk that a single high-profile episode can accelerate calls for bans, tighter federal rules or new limits on what kinds of events can be turned into tradable contracts.
