Trading in prediction markets has surged as participants flock to contracts tied to the escalating U.S.-Iran confrontation, even while federal regulators and lawmakers debate how — or whether — to regulate event-based markets. Platforms including Polymarket and Kalshi reported record weekly notional volumes for the week ending March 9, with Polymarket at about $2.49 billion and Kalshi at about $2.85 billion, per Token Terminal. Dune data shows cumulative notional volume across prediction markets climbing to roughly $145 billion, reached by around 2.8 million unique users.
Regulatory attention has increased in parallel. The Commodity Futures Trading Commission (CFTC) issued a staff advisory treating event contracts on prediction markets as a “financial asset class” and published an Advanced Notice of Proposed Rulemaking seeking input on how the Commodity Exchange Act should apply to these platforms. CFTC Chair Michael Selig has publicly asserted the agency’s exclusive jurisdiction over prediction markets and asked for public comment as part of possible rulemaking.
That federal claim recently met a judicial challenge: in a recent Ohio ruling, a judge found that Kalshi had not demonstrated the Commodity Exchange Act would necessarily preempt Ohio’s sports-betting laws or that the contracts at issue unquestionably fell under the CFTC’s exclusive authority. Kalshi, headquartered in New York, operates as a CFTC-regulated Designated Contract Market (DCM).
Polymarket’s U.S. operations are also subject to CFTC oversight. After acquiring QCX LLC, a CFTC-licensed exchange and clearinghouse, for $112 million, Polymarket rebranded that business as Polymarket US while keeping an offshore platform separate. In January 2022 the CFTC charged Polymarket’s parent, Blockratize, with offering unregistered event-based options; the company settled by paying $1.4 million in civil penalties and winding down unlicensed activities. In November 2025 the CFTC issued an Amended Order of Designation for Polymarket US, vacating prior restrictions and authorizing trading as a DCM.
Meanwhile, lawmakers are proposing statutory limits. Senator Adam Schiff (D-CA) introduced the DEATH BETS Act, which would amend the CEA to bar federally regulated prediction markets from listing contracts tied to war, terrorism, assassination, or individual deaths. The bill follows reports of trader gains tied to military events — including allegations that six Polymarket traders collectively earned about $1 million by correctly wagering on a U.S. strike against Iran — and a separate case in which Israeli authorities arrested and later indicted two people accused of trading on privileged information about an Israeli strike on Iran.
Market composition has shifted: politics-related contracts surged to become the third-largest category on Polymarket (roughly $598 million in weekly notional volume) and ranked eighth on Kalshi (about $16 million last week), per Dune.
The interaction of rapid platform growth, sensitive geopolitical events, and concerns about insider trading has put prediction markets at the center of a broader debate over innovation, market integrity, and the ethics of betting on violent events. Regulators are soliciting public comment as they consider new rules, while legislators weigh proposals to ban certain types of contracts.
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