US Democratic lawmakers are drafting a bill to regulate prediction markets after concerns that insiders traded on bets about the timing of Israeli and US strikes on Iran.
Senator Chris Murphy said in a video posted to X that what he described as White House insiders made “a very specific bet” on Friday that the US would strike Iran on Saturday. “Obviously, there are people close to Donald Trump who, on Friday, knew what was happening on Saturday, and it is very likely — probable even — that the people that placed those bets were people with inside information,” Murphy said. He warned that allowing bets on war to continue could create perverse incentives, with people close to the president “pushing us into war because they can cash in.”
Reuters reported that Murphy and Democratic Representative Mike Levin are working on legislation targeting prediction markets such as Polymarket and Kalshi. The move follows widely circulated reports that six newly created accounts on Polymarket earned around $1 million combined from wagers on the timing of US strikes in Iran, with some bets placed just hours before explosions were first reported in Tehran. Polymarket’s event tracking shows about $529 million in volume on US-strikes-in-Iran markets. Separately, a Polymarket user reportedly made roughly $400,000 betting on the capture of Venezuelan President Nicolás Maduro last month.
Levin said using prior knowledge of military action for financial gain “should be absolutely illegal.” He noted that commodity rules already ban event contracts tied to war, terrorism, or other events “contrary to the public interest,” but argued current regulatory gaps give prediction markets too much freedom.
The episode has intensified scrutiny of decentralized and online betting platforms that let users stake money on geopolitical events. Lawmakers are weighing whether new statutory restrictions or tighter enforcement of existing commodity and securities rules are needed to prevent insider trading and limit markets on outcomes that could harm public interest.
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