Prediction market activity has surged as traders pile into contracts tied to the growing U.S.-Iran conflict, even as Washington moves to clarify federal rules for event-based markets and considers legislation to bar markets tied to war, terrorism and death.
Notional trading on Polymarket and Kalshi hit record weekly highs in the week ending March 9, reaching $2.49 billion and $2.85 billion, respectively, according to Token Terminal. Dune data shows total notional volume across prediction markets has climbed to $145 billion, reached by roughly 2.8 million unique users.
Regulators are simultaneously soliciting public comment on new rulemaking for prediction markets and debating bans on certain event contracts. The Commodity Futures Trading Commission (CFTC) issued a staff advisory that classifies event contracts traded on prediction markets as a “financial asset class,” and released an Advanced Notice of Proposed Rulemaking asking 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.
That assertion faced a judicial check last Monday when an Ohio judge ruled that Kalshi had not shown the CEA would necessarily preempt Ohio’s sports-betting laws or that those contracts fell under the CFTC’s exclusive authority. Kalshi is headquartered in New York and operates as a CFTC-regulated Designated Contract Market (DCM).
Polymarket’s U.S. operations are also under CFTC oversight. Polymarket US, headquartered in New York City, began operating under the CFTC after Polymarket acquired QCX LLC, a CFTC-licensed exchange and clearinghouse, for $112 million and rebranded as Polymarket US; the company’s offshore platform remains separate. In January 2022 the CFTC charged Polymarket’s parent, Blockratize, with offering unregistered event-based options; the firm 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.
Lawmakers are also moving. Senator Adam Schiff (D-CA) introduced the DEATH BETS Act, which would amend the CEA to prohibit federally regulated prediction markets from listing contracts tied to war, terrorism, assassination, or individual deaths. The bill follows renewed insider-trading concerns after reports that six Polymarket traders collectively earned $1 million by accurately wagering on a U.S. strike against Iran. In a separate case, Israeli authorities arrested and later indicted two people accused of using privileged information about an Israeli strike on Iran to trade on Polymarket.
The recent U.S. and Israeli military actions involving Iran have driven a noticeable shift in market activity. Politics-related contracts jumped to become the third-largest category on Polymarket—about $598 million in notional weekly volume—and ranked eighth on Kalshi at roughly $16 million last week, per Dune.
Prediction markets’ rapid growth and heightened political sensitivity have drawn scrutiny from both regulators and legislators, who are weighing how to balance marketplace innovation, market integrity, and ethical limits on wagering tied to violent events.
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