Bets placed on the potential removal of Iran’s Supreme Leader Ayatollah Ali Khamenei have come under scrutiny from prediction markets like Polymarket and Kalshi, prompting calls from Democratic U.S. lawmakers to ban wagering on military actions that could benefit individuals with privileged information.
Following the death of Khamenei in Israeli airstrikes on Tehran over the weekend, concerns were raised by U.S. lawmakers and analysts regarding bets made on his ouster prior to the attacks, raising questions about the legality and ethical implications of such transactions, including the risk of insider trading.
An examination of Polymarket’s website by Reuters revealed that $529 million was staked on contracts linked to the timing of the attacks, with an additional $150 million wagered on contracts related to the removal of Khamenei as supreme leader.
Bubblemaps, an analytics firm, disclosed that six accounts made a $1.2 million profit from Polymarket bets placed shortly before the weekend’s raids, while Kalshi also hosted a market on the topic of “Khamenei out.”
Democratic Senator Chris Murphy criticized the practice, stating his intention to introduce legislation to prohibit such activities, alleging potential profiteering by individuals close to President Donald Trump. In response, a White House spokesman emphasized that the Trump administration prioritizes the best interests of the American people.
Another Democratic Representative, Mike Levin, highlighted a Polymarket bet made just before the strikes in Iran, calling for transparency and oversight on prediction markets to prevent exploitation of advance knowledge of military actions.
Concerns about prediction markets violating U.S. regulations and incentivizing conflict and disclosure of classified information were raised by Democratic senators in February. Polymarket defended its operations, claiming to leverage collective intelligence for accurate and impartial predictions, while Kalshi stated its prohibition on death-related bets and insider trading, emphasizing its regulatory compliance and fee refunds to users.
Prediction markets have surged in popularity since the 2024 U.S. election, offering tradable contracts on various real-world events. U.S. laws prohibit wagers against public interest or involving war and assassination, with potential illegality in trading on undisclosed information, subject to market specifics and trading entities.
While prediction markets operate in a regulatory grey area, efforts are underway by the Commodity Futures Trading Commission to establish federal oversight. These platforms witnessed $47 billion in global trading volume last year, attracting interest from Wall Street entities seeking to participate, such as the New York Stock Exchange parent ICE’s investment in Polymarket and Plus500’s launch of prediction markets in partnership with Kalshi.
