Wagers on popular speculation markets tied to the future of Iran’s Supreme Leader Ayatollah Ali Khamenei and the timing of US military strikes in the country are raising concerns about possible insider trading and the practice of betting on death.
Kalshi and Polymarket users have flocked to the platforms in recent weeks to bet millions on potential actions involving Iran. For example, one Polymarket contract from January drew $4 million in bets on whether the US or Israel would strike Iran first.
Wagers on Iran turned into a wind for some users. One trader, under the account name “Magamyman,” made about $600,000 during the US-Israeli strike on Iran, according to data from Polymarket.
The timing of these bets is causing some lawmakers to question whether the bets were made based on inside information, Sen. Chris Murphy, Democrat from Connecticut, promising to introduce legislation to stop such practices. At the same time, ethical concerns are growing about allowing users to speculate on certain issues.
President Trump announced that Khamenei was were killed in US-Israeli wars on Saturday. Iranian officials confirmed his death later that day.
“This madness is legal”
Concerns about possible insider trading arose after Polymarket users placed bets during the US strike on Iran. Traders bet half a million dollars on a platform deal called “US hits Iran with…?”.
The investigation intensified after Bubblemaps, a blockchain analytics company, posted on X that “six suspected insiders made a $1.2M bet on a US strike on Iran.” Bubblemaps said traders bet “yes” hours before the strike. One user bet $26,000 and won more than $200,000, according to the Wall Street Journal.
Sen. Murphy of Connecticut responded to a post by Bubblemaps on X writing, “This madness is legal. The people around Trump are profiting from war and death. I am introducing legislation ASAP to stop this.”
The senator’s office and the White House did not immediately respond to requests for comment.
“Isider trading in broad daylight. This should be illegal without a doubt,” Senator Ruben Gallego, Democrat from Arizona, wrote March 1 on social media.
Gallego did not immediately respond to a request for comment.
Gambling on death?
Some critics said the market’s gamble on predicting the fate of Iran’s leader also raised ethical questions. Such deals “more or less give the market a proxy for execution,” said Amanda Fischer, policy director and chief operating officer of Better Markets, a nonprofit advocacy group focused on financial reform, in Feb. 28 social media posts.
The Kalshi contract on the timing of Khamenei’s ouster as the president of Iran pulled in about $55 million in trading volume, while the Polymarket contract generated more than $58 million.
Users of the prediction market place financial bets on the outcome of politics, sports and many other events. This involves buying a “contract” for a price from $0 to $1 each, indicating a 0% to 100% probability of what the traders think can happen. Users can trade these contracts until the event occurs, with speculative markets matching buyers and sellers on both sides of the transaction.
Users who bet correctly are rewarded. If the dealer’s bet is wrong, they win nothing and lose whatever money they bet.
Kalshi’s carve out
Kalshi told CBS News that he doesn’t allow customers to place bets on people’s deaths. The company “included all security measures in this market to ensure that people cannot sell about death,” a company spokesperson said in an email.
Kalshi’s agreement that Khamenei would be “out” as the president of Iran included a “death” aimed at preventing the market from betting on his death, Kalshi co-founder Tarek Mansour wrote in a March 1 social media post.
The carveout states that when a leader “goes out” due to their death, the market will adjust and pay based on the last selling price before the person’s death, Mansour said.
Mansour noted that Kalshi emphasized this carveout on the contract page to notify the buyers of the exception.
“Death rates are important; as a federally controlled prediction market, we need and feel it is important that we cannot make a direct profit from war, murder, terrorism or other violence,” he added.
Kalshi also said that it does not provide markets for the military strike, as it is illegal under the Commodities Exchange Act. “The only platforms that offer them are offshore, unregistered platforms beyond the reach of US law enforcement,” the spokesperson said in an email.
Polymarket did not respond to a request for comment. The platform agreement on Khamenei says it is under “final review.”
Issues for legislators
Before the war in Iran, some lawmakers expressed concern that the platforms could encourage violence or endanger national security by making other deals.
In a letter to the Commodity Futures Trading Commission, which regulates futures markets, the six senators asked the agency to reiterate that it will “absolutely prohibit a settlement agreement if it is closely related to the death of a person.” Lawmakers have given the agency until March 9 to respond.
“We agree that death contracts have no place on the American exchange,” the Coalition for Prediction Markets, an industry group focused on safe and sound prediction markets, wrote on X in response to a CNBC article about the letter.
The CFTC, which bans contracts related to terrorism, genocide and war, did not immediately respond to a request for comment.
Kalshi’s insider trading is prohibited
One Polymarket wager it caused a similar conflict earlier this year after a trader bet on the capture of the former President of Venezuela Nicolás Maduro Before President Trump announced his dismissal.
At the time, experts said the user, who made $436,000 on the bet, may have obtained classified information about US operations.
Kalshi, however, last month suspending and charging two users insider trading, including an employee of popular YouTuber MrBeast. Bits related to MrBeast’s videos were noted by Kalshi’s monitoring team for “reasonable commercial success in markets with low volatility,” according to the company.
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