Prediction markets are under intense political scrutiny after accounts on Polymarket allegedly reaped more than $1 million in profits tied to U.S.-Israeli air strikes on Iran over the weekend.
Sen. Chris Murphy (D-Conn.) and Rep. Mike Levin (D-Calif.) both issued statements Saturday criticizing the platform, with Murphy announcing plans to introduce legislation to ban such activity and Levin demanding oversight after a single account reportedly turned roughly $87,000 into over half a million dollars overnight. Six freshly created accounts on Polymarket collectively raked in $1.2 million, according to cited reports, while Bloomberg reported that $529 million was traded solely on contracts tied to the strikes.
According to the New York Post, the issue has sparked fierce debate over whether prediction markets — once celebrated as superior information-aggregation tools — have become vehicles for profiting from advance knowledge of government military operations. For free-market advocates, the question isn't simple: markets thrive on information, but when that information may come from classified government channels, the playing field isn't level — it's rigged.
According to analytics firm Bubblemaps SA and reporting from NPR, an account called "Magamyman" allegedly made $553,000 in a single day by betting on the killing of Iranian Supreme Leader Ayatollah Ali Khamenei, who was killed in the attacks Saturday in Tehran. The shares were purchased just hours before the first explosions were reported in Tehran, Iran. At the time of purchase, the market placed the probability of the event at just 17 percent. Rep. Levin laid out the math plainly: "When this person bought in, the market had this at a 17% probability. They turned roughly $87,000 into over half a million dollars overnight." The timing alone raises questions that are difficult to dismiss.
Beyond the Khamenei contract, bets were placed that the U.S. would strike Iran on Feb. 28 — and the winning contract tied to that date generated around $90 million in trading volume. The next most-traded contract, for an attack by Jan. 31, saw $42 million in volume. Additional contracts now live on the platform ask whether the Iranian regime will fall by this summer and whether U.S. forces will enter Iran this week.
Sen. Murphy didn't mince words in his Saturday response. "It's insane this is legal. People around Trump are profiting off war and death. I'm introducing legislation ASAP to ban this," he wrote, responding to a tweet about the alleged insider trading.
Rep. Levin echoed the concern while also pointing to the platform's political connections. He noted that Donald Trump Jr. sits on Polymarket's advisory board and that the DOJ and CFTC scrapped active investigations into the prediction market soon after President Trump returned to the Oval Office. No specific case details or dates for those dropped investigations were provided.
"Prediction markets cannot be a vehicle for profiting off advance knowledge of military action. We need answers, transparency, and oversight," Levin said. Many U.S. states are now arguing that prediction markets should abide by gambling regulations, though no specific states or laws were named in reports.
This is not an isolated incident. Earlier this year, similar trading patterns raised alarms on prediction platforms. In January, a Polymarket user made $400,000 betting on the ouster of Venezuelan leader Nicolás Maduro. The pattern of freshly created accounts placing large, well-timed bets on geopolitical events is becoming harder to ignore.
Rival platform Kalshi has taken a different approach, stating it "doesn't allow markets directly tied to death." Kalshi also recently banned and fined two users it accused of insider trading, including a MrBeast employee and a former GOP gubernatorial candidate who allegedly traded on contracts related to the YouTuber's content. Polymarket, notably, does not allow American bettors, though users can reportedly skirt around these blockages using a VPN.
Meanwhile, Mick Mulvaney, Trump's former acting chief of staff, recently launched Gambling Is Not Investing, a new group looking to crack down on prediction markets — specifically those with sports contracts. The bipartisan nature of the concern is telling.
Here's the core tension: prediction markets are powerful precisely because they incentivize participants to put money behind their best information. That's the free-market case for them. But when "best information" potentially means classified intelligence about imminent military strikes, the market isn't discovering truth — it's laundering secrets for profit.
Milton Friedman himself argued that markets work best when rules are clear and evenly enforced. The absence of regulatory clarity around prediction platforms is not deregulation — it's a vacuum that invites abuse. The question going forward is whether Congress can craft targeted oversight that addresses insider exploitation without destroying the legitimate informational value these markets provide.
For investors and market watchers, this story is a reminder that new financial instruments always outpace regulation. Whether you view prediction markets as innovation or exploitation likely depends on who's sitting at the table when the bets are placed — and whether they already know how the cards will fall.