Congressional Democrats are drafting new legislation to crack down on prediction betting platforms following suspicious trading activity that raised red flags about potential insider knowledge of military operations.
Representative Mike Levin of California and Senator Chris Murphy are spearheading the legislative effort after traders made substantial profits betting on events in Iran just hours before U.S.-Israeli air strikes occurred.
“Chris Murphy and I are working on this. It’s unbelievably clear to me that if anyone is using prior knowledge of military action for financial gain that should be absolutely illegal,” Levin said during a recent interview.
The controversy centers around platforms like Polymarket and Kalshi, where users can place bets on real-world events. Analytics company Bubblemaps discovered that six trading accounts earned $1.2 million in profits from wagers on the removal of Iran’s Supreme Leader Khamenei, placing these bets just hours before the military action that resulted in his death.
Current federal law through the Commodity Exchange Act prohibits event contracts considered “contrary to the public interest,” including those related to warfare, terrorism, or assassinations. However, Levin argues these existing regulations provide too much wiggle room for betting platforms.
“There is no good way for people to be betting on war and death,” Levin stated, noting that fellow Democratic colleagues share his concerns and he anticipates building broader support for the initiative.
This isn’t the first time such platforms have drawn scrutiny. Last month, six Democratic senators criticized the betting sites after an unidentified trader earned approximately $410,000 in profits by wagering on Venezuelan President Nicolas Maduro’s removal from power.
Following Saturday’s revelation about the Iran-related trades, both Levin and Murphy took to social media platform X to express their concerns. Murphy indicated the suspicious activity demonstrated that insiders were capitalizing on warfare and promised to introduce legislation “ASAP.”
Polymarket responded to criticism this week by removing betting options related to the possibility of nuclear explosions worldwide after facing significant online backlash.
A Kalshi representative defended their platform’s practices, stating they prohibit and actively monitor for insider trading violations. “We also don’t list markets directly tied to death,” the spokesperson added.
Polymarket, which primarily operates in international markets, has previously defended prediction markets as tools that utilize collective intelligence to generate accurate and unbiased forecasts.
While the proposed legislation faces an uphill battle to become law in the immediate future, it adds mounting pressure on prediction betting platforms amid growing concerns that such wagering could incentivize conflict or the disclosure of classified government information.
