Prediction Markets Face Reckoning Over Iran Bets as Senators Push for Death-Contract Ban

Prediction market platforms Kalshi and Polymarket are facing scrutiny over their handling of contracts tied to the U.S.-Israeli strikes on Iran, with lawmakers calling for new restrictions on markets that resolve on individuals' deaths.

Over $529 million was traded on Polymarket contracts related to the timing of the strikes, according to Bloomberg, while Kalshi's "Ali Khamenei Out as Supreme Leader?" market accumulated more than $50 million in volume — roughly $20 million of which traded on Saturday alone.

Iran's Supreme Leader Ali Khamenei was killed in the strikes early Saturday morning.

Settlement Controversy

Kalshi CEO Tarek Mansour defended the platform's market design in a post on X, stating that the company does not list contracts "directly tied to death" and designs rules "to prevent people from profiting from death."

Under Kalshi's CFTC-filed terms, positions were settled at the last traded price before Khamenei's death, recorded at 1:14 AM ET. The platform halted trading at approximately 2:59 PM ET and formally closed contracts at 10:06 PM ET.

The settlement drew criticism after users noted discrepancies between the filed rules — which referenced the "last traded price prior to death" — and the market page, which stated "prior to confirmed reporting of death." Hours of active trading occurred between the strike and public confirmation.

Kalshi issued two clarifications acknowledging the language was "grammatically ambiguous" and announced it would reimburse all fees from the market. Traders who entered positions after Khamenei's death will receive full refunds.

Amanda Fischer, former SEC chief of staff and current executive at Better Markets, described the market as "more or less offering a proxy market on assassination."

Insider Trading Concerns

Polymarket, which operates outside U.S. jurisdiction and requires only a crypto wallet to trade, faces separate questions about potential insider trading.

Analytics firm Bubblemaps SA identified six newly created accounts that collectively profited approximately $1 million by correctly betting on the February 28 strike date, Bloomberg reported. The accounts were created in February and placed bets only on Iran strike timing, with some wagers made hours before the attacks began.

"Events like conflicts and wars, combined with anonymity, create incentives for informed participants to act early," Bubblemaps CEO Nicolas Vaiman told Bloomberg.

The pattern echoes concerns raised by analytics firm Polysights in January, which flagged unusual betting activity on contracts related to Khamenei's leadership status.

Regulatory Pressure

Six Democratic senators led by Adam Schiff sent a letter to CFTC Chairman Michael Selig urging the agency to ban contracts that "result in or correlate to an individual's death." The letter set a March 9 deadline for a response.

The Coalition for Prediction Markets, an industry group, stated that "contracts involving death have no place on American exchanges."

In February, Israeli authorities filed what are believed to be the first criminal charges related to prediction market insider trading, accusing a military reservist and civilian of making $150,000 using classified intelligence on Polymarket.

Kalshi has previously disclosed enforcement actions against users suspected of insider trading, including a MrBeast editor who allegedly used knowledge of unaired content to place bets.