Millions of dollars are being wagered on the timing and outcome of geopolitical events, including the recent conflict involving Iran, on the US-based online prediction market Polymarket. The platform allows users to buy and sell contracts that pay out based on real-world occurrences, prompting concerns about insider trading and the ethical implications of profiting from global instability.
Data cited by Bloomberg revealed approximately $529 million was traded on contracts linked to potential US strikes against Iran. Six newly created accounts reportedly made around $1 million in profit by correctly predicting the timing of the first strikes, which occurred on February 28, raising suspicions of foreknowledge. One specific contract betting that the US would strike Iran by February 28 saw around $90 million in trading.
The surge in betting activity coincided with actual military action, leading to scrutiny from lawmakers and experts. A trader using the username “Magamyman” earned over $553,000 betting on the removal of Iran’s Supreme Leader Ayatollah Ali Khamenei, just hours before his reported death during joint U.S.-Israeli strikes, according to reports in USA Today and the Economic Times. Senator Chris Murphy (D-Connecticut) called the situation “insane,” suggesting potential profiteering by individuals close to former President Trump and indicating plans to introduce legislation to limit such betting.
Rune Aune Mentzoni, a gambling researcher at the University of Bergen, criticized Polymarket, stating the platform facilitates a form of “insider trading on major world political events.” Speaking to Nettavisen, Mentzoni argued that the economic incentives created by large sums of money at stake are “problematic on all possible ways,” and warned that influential individuals could be tempted to manipulate events. He further stated that the platform’s framing as an objective information source is dubious, asserting that its primary motivation is profit.
The anonymity afforded by cryptocurrency transactions exacerbates the challenges of regulation. Experts note that while insider trading is illegal in traditional financial markets, the decentralized nature of Polymarket and its use of crypto make it difficult to enforce existing laws. Morten Kinander, a professor at BI Norwegian Business School, explained that current market abuse regulations are designed for regulated exchanges, leaving Polymarket in a “regulatory no man’s land.” He added that the lack of a clear jurisdictional authority and identifiable operator complicates any potential investigation.
Eskil Grendahl Sivertsen, a special advisor at the Norwegian Defence Research Establishment (FFI), highlighted the potential for manipulation, noting that state and non-state actors could use large bets to influence perceptions of escalation or de-escalation. He also cautioned that the increasing visibility of such betting services in media and among influencers could make them attractive platforms for spreading disinformation or creating fear. Sivertsen emphasized that while investors routinely factor geopolitical events into their decisions, Polymarket offers a more direct and less regulated avenue for such speculation.
Polymarket defends its role, stating on its website that its prediction markets can provide insights that traditional news sources cannot. However, Mentzoni dismissed this claim, reiterating his belief that the platform is primarily driven by profit. The debate over the legality and ethics of Polymarket continues, with calls for increased regulation and greater oversight of these emerging prediction markets.
