Prediction markets, such as Polymarket and Kalshi, faced scrutiny on Monday for offering bets on the removal of Iran’s Supreme Leader Ayatollah Ali Khamenei. The bets drew attention from Democratic U.S. lawmakers who raised concerns about the legality of profiting from insider knowledge of military actions.
The controversy arose after Khamenei was killed in Israeli air strikes on Tehran over the weekend. Lawmakers and analysts highlighted bets that were placed on Khamenei’s ouster just before the attacks, sparking debates on the ethics and legality of such trades, including the potential for insider trading.
A review of Polymarket’s website revealed that significant amounts were wagered on contracts related to the timing of attacks and the removal of Khamenei as the supreme leader. Bubblemaps reported that six accounts made a substantial profit from Polymarket bets placed shortly before the raids. Kalshi also offered a market on the event of “Khamenei out.”
Democratic Senator Chris Murphy criticized the legality of these bets, expressing concerns that individuals connected to President Donald Trump might be benefiting from the conflict. In response, he announced plans to introduce legislation to outlaw such practices. White House spokesman Davis Ingle emphasized that the administration prioritizes the best interests of the American people.
Another Democratic lawmaker, Rep. Mike Levin, called attention to a Polymarket bet made just before the strikes, emphasizing the need for transparency and oversight in prediction markets to prevent profiting from advance knowledge of military actions.
Earlier in February, Democratic senators raised alarms over prediction markets potentially violating U.S. regulations and incentivizing the disclosure of classified information. Polymarket defended its platform, stating that prediction markets leverage collective wisdom to produce unbiased forecasts.
Kalshi distanced itself from direct wagers linked to death events and announced that it did not profit from the Khamenei market, refunding fees to users. The platform, which is regulated, prohibits insider trading.
Prediction markets have gained popularity since the 2024 U.S. election for their accuracy in forecasting real-world events. These markets offer tradeable contracts on various topics, with bet costs fluctuating based on probabilities. U.S. law restricts wagers contrary to the public interest, including those related to war or assassination.
The regulatory status of prediction markets remains uncertain, with the Commodity Futures Trading Commission planning to establish a federal framework to oversee them. These markets have attracted significant trading volumes, prompting interest from Wall Street firms like ICE and Plus500 to invest and offer prediction markets on their platforms.