Polymarket and Kalshi’s Iran war bets cross a dangerous line: Paul J. Davies

As the world grows more uncertain, clarity matters more than ever. BNC#8 brings together some of the smartest and most experienced minds to help you cut through the noise and navigate the turbulence with greater confidence. Tickets are selling out fast, with only 40 left. Don’t waste time, book your place at BNC#8 by clicking here or on the image below..Key topics:Insider bets on US–Iran strikes raise moral concerns.Prediction markets face growing fears of insider trading.Calls to ban war-related wagers on these platforms..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Paul J. Davies.As bad behavior in finance goes, the idea of insiders betting on the US and Israel attacking Iran is about as appalling as it gets. Cashing in on death and destruction across the Middle East — or anywhere else — would be despicable. But beyond the moral dimension, there’s also the issue of national security: Given that handing such information to an enemy would be an act of treason, should risking intelligence leaks through price signals be seen as any less traitorous?Prediction markets already face questions about their propriety after a string of dubious trades attracted public scrutiny in recent months. Kalshi Inc. and Polymarket should just stop offering wagers on anything related to war, military operations or regime change — shockingly, Polymarket also hosts trades on whether a nuclear bomb will be detonated in Ukraine this year. Legitimate needs to hedge financial or commodity risks are already well-served by existing futures and options markets; no one needs these wild-west binary bets. The facts of last weekend are these: More than $500 million had been staked on Polymarket about the timing of a US strike against Iran by the time it happened on Saturday, according to Bloomberg News. Six players who reaped combined profits of $1 million by correctly anticipating a Feb. 28 attack were new accounts that had only ever put wagers on America bombing the country..Read more:.FT: Military Briefing — US/Israeli strikes and Iran's retaliation.Suspicions about insider trading on the big prediction markets have grown almost as rapidly as their trading volumes. In January, a new account on Polymarket won more than $400,000 forecasting America’s out-of-the-blue raid on Venezuela and capture of its president Nicolás Maduro. That followed several other dubious-looking trades on a wide variety of events where someone could know the outcome before it was public.And this really matters now that the platforms are no longer tiny upstarts that governments can ignore. Combined weekly volumes on Kalshi and Polymarket, the two biggest venues by far, exceeded $5 billion at the end of February, according to data compiled by Dune Analytics. Polymarket has been valued at $9 billion and is backed by New York Stock Exchange parent Intercontinental Exchange Inc., among others; Kalshi has a valuation of $11 billion..Last month, Kalshi confirmed that bad behavior does happen when it sanctioned an editor who worked on the YouTube channel of MrBeast for a series of winning wagers on the upcoming contents of the show. Also in February, it gave Kyle Langford, a Republican candidate for California governor, a slap on the wrist for a publicity stunt where he bet on his own victory last May.After Kalshi’s internal enforcement of these two cases, the Commodity Futures Trading Commission issued a statement reminding everyone it has the authority to police illegal trading on prediction markets. The watchdog should get on with its job; it takes resources and investigative powers to properly crack down on rulebreakers. Sure, there are potential explanations for why winners bet on the Iran attack when they did and some of the dodgy-looking new accounts actually made bad bets. There was roughly $25 million wagered on Feb. 27 as the day of US strikes; one of the six winning accounts lost about $300 on that bet, according to Bloomberg News. These people could have been looking at public information. President Donald Trump has been making threats against Iran for weeks in his typical negotiating style. Also, there’s an x.com account called the Pentagon Pizza Report that regularly posts about takeaway traffic near the Department of Defense headquarters in Washington DC, which some see as a proxy for personnel working overtime that might signal something. Polymarket has its own Pentagon Pizza Index page. Even if the CFTC puts much more effort into policing these platforms, that won’t solve all the issues. Polymarket’s offshore business isn’t overseen by the watchdog, and it allows accounts to use crypto-wallets, which aid anonymity. Allowing these kinds of bets with the possibility of insiders is not just bad, it’s dangerous. Imagine if Iranian leaders had interpreted the ramping up of bets on a US strike as a credible signal and launched pre-emptive attacks on US assets or Israel first. This isn’t nearly as fanciful as it sounds. Just last week, Israel filed charges against two people accused of using classified information to make bets on Polymarket related to Israel’s security operations, without detailing the wagers. The authorities described them as posing a threat to the country’s national security. These are real fears..Read more:.The Economist: Trump, Bibi - Wild cards raising stakes in mass protest convulsing Iran.Everyone involved here ought to be thinking about much more than their own reputations. Yes, the platforms, their investors and governments must all do more to properly stamp out the potential for insider trading. But regardless of financial crime, Kalshi and Polymarket should just cease making markets in military action and war. .© 2026 Bloomberg L.P.

Polymarket and Kalshi’s Iran war bets cross a dangerous line: Paul J. Davies

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