Bets placed on the potential removal of Iran’s Supreme Leader Ayatollah Ali Khamenei came under scrutiny from prediction markets like Polymarket and Kalshi on Monday. This raised concerns from Democratic U.S. lawmakers about the ethics and legality of betting on military actions that could benefit individuals with privileged information.
Following the Israeli air strikes in Tehran that resulted in Khamenei’s death over the weekend, concerns were raised about bets made prior to the attacks and the potential for insider trading. A review of Polymarket’s website revealed significant sums were wagered on contracts related to the timing of attacks and the removal of Khamenei as the supreme leader.
Analytics firm Bubblemaps reported that six accounts made a $1.2-million profit from Polymarket bets placed just before the raids, while Kalshi also offered a market on the possibility of Khamenei being removed from power.
Democratic Sen. Chris Murphy criticized the legality of such bets, suggesting that individuals close to President Donald Trump may be profiting from the conflict. In response, he announced plans to introduce legislation to prohibit such practices. White House spokesman Davis Ingle emphasized that the administration prioritizes the best interests of the American people.
California Rep. Mike Levin also raised concerns about a Polymarket bet made shortly before the strikes in Iran, calling for transparency and oversight to prevent profiting from advance knowledge of military actions.
Democratic senators previously expressed worries about prediction markets violating U.S. regulations and incentivizing conflict and disclosure of classified information. Both Polymarket and Kalshi defended their platforms, stating they aim to provide accurate and unbiased forecasts while adhering to regulations and banning insider trading.
Prediction markets have gained popularity since the 2024 U.S. election, offering users the opportunity to trade on various real-world events. However, the legality of trading on non-public information remains a subject of debate, with regulatory bodies like the Commodity Futures Trading Commission looking to establish federal oversight for prediction markets.
In recent years, prediction markets have seen significant growth in trading volume, attracting interest from traditional financial institutions. Major players like the New York Stock Exchange parent company ICE and trading platform Plus500 have made strategic moves to capitalize on the growing popularity of prediction markets.
