Traders profit on betting platforms with US-Israel strike on Iran

The recent joint strikes by the United States and Israel on Iran have created a political uproar, sparking criticism of the White House’s unilateral military actions and raising doubts about the legality of these strikes. However, another concerning issue arising from these attacks is the profiteering by certain individuals through prediction-market platforms such as Kalshi and Polymarket. Traders on these platforms are wagering on the outcomes of conflicts and high-stakes geopolitical events, drawing attention from lawmakers and the public alike.

Over the weekend following the strikes, a Polymarket user known as “Magamyman” reportedly made a substantial profit of more than $500,000 by betting on the prediction that Iran’s supreme leader, Ayatollah Ali Khamenei, would be ousted from power. This raised red flags for insider trading since the bet was placed when the probability of a strike was only 17 percent, showing a potential foreknowledge of the military action. Other users with anonymous handles such as “Planktonbet,” “Dicedicedice,” and “nothingeverhappens911” also engaged in betting on the potential of a US strike on Iran right before or after the attacks, exclusively focusing on Iran-related bets.

These incidents are reminiscent of past occurrences where traders profited from predictions on significant events like former Venezuelan President Nicolas Maduro’s abduction or opposition leader Maria Corina Machado winning the Nobel Peace Prize. Such incidences had previously raised concerns about profiteering from conflicts and potential insider trading. Polymarket operating on cryptocurrency with anonymous users has been under increased scrutiny due to these factors, whereas Kalshi, a US-regulated prediction market, requires user identification and is supervised by the Commodity Futures Trading Commission (CFTC).

Prediction markets allow individuals to trade “shares” tied to real-world events, with share prices fluctuating based on the perceived likelihood of outcomes. While these markets resemble the trading of stocks, each contract has a predetermined end date corresponding to the conclusion of the event being predicted, resembling gambling or sports betting. The recent incident involving the Iran strike prediction had an end date of February 28, 2026, reflecting a time-bound outlook on geopolitical events.

The intensifying concerns around profiteering from prediction markets have prompted bipartisan reactions. Former White House Office of Management and Budget Director Mick Mulvaney has launched a coalition advocating for regulation of prediction markets, akin to state-level gambling rules, emphasizing the need for licensing, age restrictions, and taxes. Utah Governor Spencer Cox has gone a step further, calling for a complete ban on prediction markets, labeling them as forms of harmful gambling, regardless of their rebranding as financial products.

On the Democratic side, Senator Chris Murphy criticized the Polymarket Iran trades, deeming them “insane” and expressing intentions to introduce legislation to ban such practices. Senator Adam Schiff and a group of 21 Democratic senators had previously penned a letter to CFTC Chairman Mike Selig, urging increased regulation of the prediction market industry due to its real-world implications and lack of public revenue generation. With varying opinions and growing concerns over the ethics and legality of profiting from conflict through prediction markets, the push for stricter regulations and even bans on these platforms is gaining traction across party lines.