Online betting platforms that allow people to place wagers on everything from sports to political outcomes are facing renewed scrutiny after suspicious trading activity surrounding the conflict in Iran.
Before this week’s fragile ceasefire agreement was announced, several new accounts on the Polymarket platform placed extremely precise, well-timed bets predicting a fighting halt would be declared on April 7. The traders collectively earned hundreds of thousands of dollars in winnings, while others await payouts as the conflict’s resolution remains uncertain.
These transactions have again highlighted concerns about the shadowy and rapidly expanding world of round-the-clock speculative betting that now dominates much of the internet. Questions about questionable activity have intensified, including one anonymous Polymarket user who earned over $400,000 after the U.S. military captured former Venezuelan President Nicolás Maduro in January.
The precise timing and subject matter of these trades have sparked worries about possible insider trading, with growing demands from legislators for formal investigations. Major platforms like Polymarket have implemented additional safeguards recently to prevent insider trading, though critics argue these measures fall short.
Additionally, since prediction market bets are classified differently from conventional gambling, disputes over government regulation have emerged. The Trump administration has already expressed support for platform operators and filed lawsuits against three states attempting to impose stricter regulations.
The range of subjects covered by prediction markets varies enormously. While there has been increased wagering on elections and athletic competitions lately, users have also invested millions in topics such as a rumored but never-materialized “secret finale” for Netflix’s “Stranger Things,” whether the U.S. government will acknowledge extraterrestrial life, and how frequently billionaire Elon Musk might post on social media monthly.
In industry terminology, purchases or sales on prediction markets are known as “event contracts.” These are usually marketed as “yes” or “no” bets, with prices fluctuating between $0 and $1, representing traders’ collective willingness to pay based on perceived likelihood from 0% to 100%.
When traders believe an event is more probable, contract prices increase accordingly. As these probabilities shift over time, users can exit positions early for modest gains or to minimize losses on existing investments.
Supporters of prediction markets contend that financial stakes lead to more accurate forecasting and provide an alternative to traditional polling for measuring public sentiment. Some believe monitoring these markets offers valuable insights into potential news developments, especially regarding elections.
However, prediction markets can produce incorrect results, and the identities of traders remain largely unknown. While platform operators collect personal information for identity verification and payment processing, most users trade under anonymous usernames on public websites, making it difficult to determine who profits from various contracts.
Theoretically, investors may closely monitor specific events, but others might simply make random guesses. Critics emphasize that the accessibility and speed of joining these continuous betting platforms leads to daily financial losses, particularly affecting users who may already have gambling problems.
Polymarket ranks among the world’s largest prediction markets, accepting payments through cryptocurrency, debit cards, credit cards, and bank transfers. Restrictions differ by country, but in the United States, these markets have grown rapidly in recent years alongside changing Washington policies.
While prediction markets have gained support from the Trump-controlled Commodity Futures Trading Commission, former President Joe Biden took a more aggressive regulatory approach. After a 2022 CFTC settlement, Polymarket was prohibited from U.S. operations. This changed under Trump late last year when Polymarket announced its return following commission approval. American users can now join a “waitlist” for platform access.
Polymarket’s primary rival, Kalshi, has operated as a federally-regulated exchange since 2020. The platform provides similar contract trading opportunities and currently permits election and sports betting nationwide. Kalshi obtained court permission weeks before the 2024 election to allow Americans to bet on political races and began hosting sports trading last year.
The sector now includes numerous major players. Major League Baseball signed an agreement with Polymarket last month, following partnerships in professional hockey and soccer. Sports betting leaders DraftKings and FanDuel have launched their own prediction platforms. Trump’s Truth Social has also announced plans for an integrated prediction market through a Crypto.com partnership, while Donald Trump Jr. holds advisory positions at both Polymarket and Kalshi.
Last month, The Associated Press agreed to provide U.S. election data to Kalshi.
Since they market event contracts rather than traditional gambling, prediction markets fall under CFTC regulation, allowing them to bypass state-level restrictions or prohibitions on conventional gambling and sports betting.
“It’s a huge loophole,” said Karl Lockhart, a DePaul University assistant law professor who studies this area. “You just have to comply with one set of regulations, rather than (rules from) each state around the country.”
Sports betting has become a central focus. Several major states, including California and Texas, still prohibit sports betting, yet residents can now wager on games, player trades, and more through event contracts.
An increasing number of states and tribal governments are attempting to halt this practice. However, the Trump administration has resisted, asserting that the CFTC holds exclusive regulatory authority over prediction markets. Legal experts anticipate litigation will eventually reach the Supreme Court.
Despite overseeing trillions of dollars in the broader U.S. derivatives market, the CFTC is considerably smaller than the Securities and Exchange Commission, which regulates securities. As event contracts proliferate rapidly on prediction platforms, the agency has experienced significant staff reductions and leadership departures. CFTC chairman Michael Selig currently serves as the only member filling one of five commissioner positions.
Congressional members from both parties have recently introduced comprehensive legislation for additional oversight. Subsequently, Kalshi, which maintains it has always prohibited insider trading, quickly implemented restrictions preventing political candidates from trading on their own campaigns and preemptively blocking sports participants from contracts related to their activities. Polymarket revised its policies to explicitly prohibit users from trading on contracts where they might possess confidential information or could influence outcomes.
The CFTC can also prohibit event contracts involving war, terrorism, and assassinations, which experts suggest could place some prediction market trades, including those related to the Iran conflict, on uncertain legal ground within the United States. Lawmakers like Democratic Senator Adam Schiff are pursuing complete bans on such trading.
Nevertheless, users might access certain contracts while traveling internationally or through different VPN connections.
