The outbreak of conflict in Iran has triggered a surge in activity on prediction markets, where speculators are wagering hundreds of millions of dollars on the outcome of geopolitical events. These markets, like Polymarket and Kalshi, allow users to bet on everything from the timing of military strikes to the fate of political leaders, turning war into a financial opportunity for a select few.
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The Rise of War Betting
In the days leading up to recent tensions, prediction markets saw intense trading as participants speculated on the timing and targets of potential attacks. A particularly active market centered on the future of Iranian Supreme Leader Ayatollah Ali Khamenei, with bets placed on whether he would remain in office. Remarkably, he died on February 28th, just days before a key bet deadline.
While the practice of betting on outcomes has existed in sports for years, prediction markets are now extending this model to global events. As Kate Knibbs of Wired explained, some platforms have even removed markets related to missile strikes due to public backlash, highlighting the dystopian nature of profiting from conflict.
Who’s Winning?
The profits aren’t distributed evenly. A small percentage of participants, including a select few, are making substantial returns – in some cases, millions of dollars. Suspicious activity has emerged, with newly created accounts making large, accurate bets before major events and then disappearing with the profits. Experts suspect insider trading, as these accounts lack a historical pattern of informed geopolitical predictions.
The legality of such practices is murky. Traditional definitions of insider trading, enforced by bodies like the SEC, don’t neatly apply to prediction markets where “non-public material information” can be hard to define.
Legal Battles and Political Backing
Kalshi currently faces multiple class-action lawsuits, including one from users who lost bets when the platform retroactively banned wagers on death after the Ayatollah’s death. The company had previously allowed such bets in its fine print.
The Trump administration has been notably supportive of these markets. Donald Trump Jr. advises both Kalshi and Polymarket, and the family plans to launch “Truth Predict,” a spin-off of Truth Social. The Commodity Futures Trading Commission (CFTC) under Chairman Michael Selig has also signaled opposition to state-level efforts to regulate these platforms, suggesting a permissive federal stance.
What’s Next?
With over 50 lawsuits in play, the future of prediction markets remains uncertain. State-level victories could set precedents that restrict operations, but absent such rulings, these platforms are likely to continue functioning as they do now. The commodification of conflict has arrived, and for some, it’s a highly profitable business.
The rise of these betting platforms raises serious ethical questions about profiting from human tragedy, yet the current regulatory environment seems to favor their continued existence.
