Lawmakers called for a crackdown on contracts tied to war and assassination, with Democratic lawmakers urging the CFTC to clamp down on such contracts.
Conflict-related betting on prediction markets hit a record last week as traders piled into wagers on the US-Israeli strikes on Iran, while blockchain analysts flagged suspicious activity and lawmakers called for a crackdown.
Bettors placed $425.4 million in wagers on geopolitics questions on Polymarket in the week ending March 1, up from $163.9 million the week before, according to user-compiled data on Dune Analytics. Across the site, total wagering reached a record $2.4 billion, up from $1.8 billion a week earlier.
The growth comes as critics question the legality and ethics of betting on military conflict. US regulations are broadly understood to prohibit financial contracts tied to war, but Polymarket's main exchange operates offshore and outside the oversight of US regulators.
After US and Israeli bombs fell on Iran on Saturday, blockchain researchers pointed to several Polymarket accounts whose trading showed signs consistent with suspected advance knowledge of the attacks.
Prediction markets have become more popular over the past year in large part because they offer a new way to bet on sports and crypto prices. Those remain the largest categories on Polymarket and Kalshi, but both companies have long promoted them as a venue for making trades on politics and global events.
Geopolitics made up about 18% of all wagering on Polymarket last week, up from roughly 9% just a week earlier.
Nine of the 10 most-traded geopolitics markets last week were tied to Iran, according to blockchain data. Contracts linked to the timing of US strikes on Iran dominated the list, with each drawing between $53 million and $8 million in volume.
The most active geopolitics market asked whether Ayatollah Ali Khamenei would be out as Iran's supreme leader by Feb. 28. That contract drew $84 million in volume on Polymarket during the week, out of $104 million total. Khamenei was killed over the weekend.
Polymarket didn't immediately respond to a request for comment on the data.
The Commodity Futures Trading Commission, which regulates prediction markets in the US, bars contracts tied to assassination, terrorism or war -- themes Polymarket, as an offshore venue, continues to list.
Kalshi Inc., a CFTC-regulated platform, also offered a market on when Khamenei would cease serving as supreme leader. Its rules included an exception that would prevent the market from resolving if Khamenei died, instead settling at the last price before death.
Compared to Polymarket, Kalshi lists fewer contracts tied to Iran because it faces more restrictions under CFTC rules. Of the top 10 markets on Kalshi by weekly volume on Monday, none was tracking a geopolitical event.
Democratic lawmakers have urged the CFTC to clamp down on contracts tied to war and assassination. In a letter to Chair Michael Selig, they demanded a response by March 9.