Prediction markets are facing intense scrutiny and user outrage after millions of dollars were wagered on events surrounding US and Israeli strikes on Iran, including bets on the potential ousting of Supreme Leader Ali Khamenei. The controversy has ignited debates over market ethics, potential insider trading, and calls for new legislation to prevent profiting from geopolitical violence.
On Saturday, as news of the strikes broke, activity spiked on platforms like Kalshi and Polymarket. Market-surveillance firm Bubblemaps identified several new cryptocurrency wallets on Polymarket that collectively made over $1.2 million betting on a US strike, with most funded just hours before the event.
Volatile Markets and Contractual Ambiguity
On Polymarket, at least $200 million was staked across four major wagers related to US strikes, regime change, or Khamenei's death. The more regulated Kalshi, which is barred by US law from offering markets on war or assassination, recorded almost $55 million in contracts betting on whether Khamenei would be "out" before activity was halted. Kalshi later clarified that its market would not resolve based on death but on the last traded price before any confirmed reporting.
The ambiguous language led to confusion. Polymarket posted a "clarification" on one closed market, stating it resolved to "no" on whether the US would "forcibly remove" Khamenei because the US had only "contribute[d] to or assist[ed]" in actions. This sparked disputes among users, with Polymarket relying on a complex, decentralized resolution mechanism logged on the Polygon blockchain.
User frustration boiled over on social media, with one Kalshi user calling the platform "terrible" after losing $11.25 on a long-shot bet. Others defended the platforms, with one commenter stating, "90% of you never read any rules and are mad at Kalshi because you couldn't make money off your lil $10. Get a grip, start reading rules."
Regulatory and Legislative Backlash
The events have accelerated political backlash. In late February, six Democratic senators asked the Commodity Futures Trading Commission (CFTC)—the main US regulator for prediction markets—to act against contracts that "incentivize physical injury or death," specifically citing Polymarket.
Senator Chris Murphy stated this weekend on X that he would introduce legislation "ASAP" to prevent "people around Trump" from "profiting off war." This follows incidents in Israel where several individuals were reportedly arrested and at least two indicted in February for using military secrets to place bets on Polymarket.
By Saturday's end, Kalshi co-founder Tarek Mansour announced that bets on Khamenei's ouster would be paid out based on their value the minute before strikes were reported, with later buyers receiving partial reimbursements. Representatives for both Kalshi and Polymarket did not immediately respond to requests for comment on Sunday.