Bets placed on the potential removal of Iran’s Supreme Leader Ayatollah Ali Khamenei have stirred controversy within prediction markets like Polymarket and Kalshi. This has led Democratic U.S. lawmakers to call for a ban on betting related to military actions that could result in financial gains for individuals with privileged information.
Following the death of Khamenei in Israeli airstrikes on Tehran, concerns were raised about bets made prior to the attacks, suggesting the possibility of insider trading. A review of Polymarket’s website revealed significant sums wagered on contracts linked to the timing of the attacks and Khamenei’s removal as supreme leader.
Analytics firm Bubblemaps reported that six accounts profited $1.2 million from Polymarket bets placed shortly before the airstrikes, while Kalshi also offered a market on the potential ousting of Khamenei.
Democratic Senator Chris Murphy criticized the legality of such activities, alleging potential profiteering by individuals associated with President Donald Trump. In response, legislation is being proposed to prohibit these practices.
Representative Mike Levin highlighted a Polymarket bet made just before the Iran strikes, emphasizing the need for transparency and oversight in prediction markets to prevent exploitation of advance knowledge of military actions.
Prediction markets have faced scrutiny from lawmakers for potentially breaching U.S. regulations and incentivizing conflict and disclosure of classified information. Despite arguments by Polymarket that these markets leverage collective wisdom for accurate forecasts, concerns persist over their ethical implications.
Kalshi, a regulated platform, clarified that it does not permit bets directly linked to death and refunded fees related to the Khamenei market. The company emphasized its prohibition of insider trading.
Prediction markets have gained popularity since the 2024 U.S. election for their accuracy in forecasting real-world events. While U.S. law prohibits wagers against public interest, trading on undisclosed information may be unlawful depending on the circumstances.
These platforms operate in a regulatory gray area, with ongoing efforts by the Commodity Futures Trading Commission to establish federal oversight. Traditional financial institutions are also taking notice, with significant investments and partnerships indicating a growing interest in prediction markets.