Players on prediction markets such as Polymarket and Kalshi have bought hundreds of millions of dollars for the current conflict in Iran. Which means lots and lots of folks are trying to get rich betting on war.
Before the US and Israel attacked Iran, the prediction markets saw a lot of activity related to the conflict. Users of the prediction markets were putting money down when the first bombs would fallas well as where bombs can hit. But one of the most labor markets was people betting like Iran’s Supreme Leader Ayatollah Ali Khamenei he would leave power before March 1. He was assassinated on February 28.
“So on Polymarket, there are tons of different bets you can make,” Kate Knibbsa senior writer for Wired, told Today, It’s Explained co-host Sean Rameswaram. “I think they’ve actually brought down some of the missile markets because of the turmoil that’s been going on in response to the fact that you can bet on war because it’s so bad.”
Something like this has happened in sports and sports betting for years. And it seems likely to happen more often due to news events due to market predictions as well. Because as Knibbs says for Rameswaram, these markets are becoming more and more popular. They have the Trump administration on their side. And people around the world seem to be attracted to the idea of betting on war.
The following is part of their conversation, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get the podcast, including Apple Podcasts, Pandoraand Spotify.
What? What kind of bets are people making on the war in Iran?
Especially on Polymarket, there are tons of different bets you can make. You can bet on when the Strait of Hormuz will open, or if it will open. You can bet on missiles. There was this popular market on whether the great leader would stay in power or not. There were markets about who his successor would be.
Almost anything you think could be a market, probably is a market, at least in Polymarket, because Kalshi has stricter rules and its offerings are not bad at all. You can’t bet on murder, for example, there. But Polymarket is largely based outside of the US, so it’s not subject to much US law, or at least that’s how it works.
How much money are people making on these types of bets now? Do we know?
“Donald Trump Jr. is an advisor to Kalshi and Polymarket. The Trump family plans to launch their own prediction market called Truth Predict.”
With Polymarket, you can see merchants’ wallets. You can see exactly how much some people benefit. And you know, as in all gambling, most people who participate in these markets lose money.
So the winners are this small percentage. And the winners who win big are the smallest piece of that little piece. So we have a very select group of people who are making, in some cases millions and millions of dollars in war.
And some of those people who make millions and millions of dollars looked suspicious, didn’t they? Because, I don’t know, they made a big bet the night before the war started that we would be going to war in a few hours and then they made hundreds of thousands of dollars..
Yes. Mainly because in most of those cases, it wasn’t as if they had a long history of being very smart and clever in geopolitical contracts.
In most of these cases, the wallets were created within days of making these highly suspicious transactions. And so a lot of different organizations that can track crypto wallets have been looking at the patterns that are emerging around these war markets and basically saying, “Look, we don’t know exactly who’s doing this, but it’s probably insider trading because there’s no way that these guys are coming out of nowhere to give out a bunch of money and make these profits disappear and disappear right away.”
Is that allowed? Is that within the parameters of what is allowed on these betting markets?
Seems like it shouldn’t be, right? It seems morally repugnant. It is clearly morally flawed. But when it comes to the definition of insider trading, we usually think of it in terms of someone having material non-public information about a company that will change the way their stock performs. It has specific definitions when talking about SEC stock market matters.
Prediction markets are regulated differently and there is some confusion about what constitutes non-public information. If there’s a Google Insider who’s an insider, it’s obvious, “Oh, they learned these specific things about how the company is going to operate.” When it comes to prediction markets, there are markets on everything. So who is an insider?
There is a class action lawsuit against Kalshi right now. What’s going on there?
Okay, so there are a bunch of differences class action lawsuits against Kalshi.
Some of them have been going on for some time and are arguing that the plaintiffs have been cheated by Kalshi because it is an illegal gambling establishment. And those are more like general interests or class actions.
I think what you are thinking of is the one that just came out that is specifically connected to the Khomeini market, where a group of people are very upset because when the Ayatollah died, they thought they would make a profit because they had placed a “yes” bet on this market that said he would no longer be in power by “X” date. And then Kalshi came out and said, “Oh, no, we don’t really allow gambling on death. And that’s been in the fine print of our laws all this time.” So instead of profiting, people got their money back, but they didn’t get the money they thought they deserved by participating in the market correctly. And so now they are suing.
Do you think what’s happened in the last couple of weeks and what people have seen with these kinds of brand new accounts, making a lot of money out of a war that’s just starting and very controversial is going to be the driving force behind some regulation?
Well, right now the Trump administration is very friendly towards prediction markets. Donald Trump Jr. is a consultant to Kalshi and Polymarket. The Trump family plans to launch their prediction market called Truth Predict as a new version of Social Truth. And the White House of the United States has not commented directly on the matters of the prediction market, but the CFTC, the Commodity Futures Trading Commission, which is a government agency that regulates this at the federal level, the chairman Michael Selig has liked to come out saying, “This is our field. All these efforts at the government level to make all these companies comply and make government bets is something that we are doing based on gambling regulations. I strongly disagree with them.”
I think there are over 50 different lawsuits floating around about this right now. Some of them, states have a chance to win. And so if the states win, it will set a precedent and these prediction markets will no longer be able to function the way they do now. And that can really change things. But other than that, I don’t, I don’t see this being curbed in any real way anytime soon.
