Bets wagered on the removal of Iran’s Supreme Leader Ayatollah Ali Khamenei have come under scrutiny from prediction markets like Polymarket and Kalshi, leading to calls from Democratic U.S. lawmakers to ban bets on military actions that could benefit individuals with privileged information.
Following Khamenei’s death in Israeli air strikes on Tehran over the weekend, concerns were raised by U.S. lawmakers and analysts regarding bets placed on his ouster prior to the attacks, reigniting debates on the legality and morality of such transactions, as well as the risk of insider trading.
A review of Polymarket’s website by Reuters revealed that $529 million was staked on contracts linked to the timing of attacks, with an additional $150 million bet on contracts related to Khamenei’s removal as supreme leader. According to analytics firm Bubblemaps, six accounts made a $1.2 million profit from Polymarket bets placed shortly before the weekend’s raids. Kalshi also hosted a market on the topic of “Khamenei out.”
Democratic Senator Chris Murphy criticized the legality of such activities, suggesting that individuals close to President Donald Trump may be capitalizing on the situation. In response, Senator Murphy announced plans to introduce legislation to prohibit such betting practices. The White House, through spokesperson Davis Ingle, emphasized that decisions are made in the best interest of the American people.
California Representative Mike Levin also raised concerns about a Polymarket bet made just before the strikes in Iran, highlighting the need for transparency and oversight in prediction markets to prevent profiting from advance knowledge of military actions.
In February, Democratic senators expressed worries that prediction markets could violate U.S. regulations, potentially incentivizing conflict and the disclosure of classified information. While Polymarket did not immediately comment on the matter, it defended prediction markets as mechanisms for generating accurate and impartial forecasts.
Kalshi clarified its stance, stating that it does not allow bets directly related to death. CEO Tarek Mansour confirmed that the company did not profit from the Khamenei market and refunded fees to users. Kalshi operates as a regulated platform and prohibits insider trading.
Prediction markets have gained popularity since the 2024 U.S. election, offering tradable contracts on real-world events such as sports, politics, and the economy. The legality of trading on non-public information varies depending on the market and the nature of the information exchanged. The regulatory status of prediction markets remains uncertain, with the Commodity Futures Trading Commission seeking to establish federal oversight.
In the global market, prediction markets saw $47 billion in trading volume last year, attracting interest from traditional financial institutions like the New York Stock Exchange. ICE, the parent company of NYSE, invested $2 billion in Polymarket, while Plus500 introduced prediction markets on its U.S. platform in collaboration with Kalshi.
This article discusses the controversy surrounding prediction markets and their role in recent events involving Iran and the implications for insider trading and regulatory oversight.