Prediction Market Users Outraged Over Alleged Insider Trading and Rigged Markets

On Saturday, while many Americans were waking up to news of US and Israeli strikes on Iran, prediction market users were left feeling confused and angry over how their bets were being processed.

Bubblemaps, a market-surveillance software company, identified several new cryptocurrency wallets connected to Polymarket that collectively made over $1.2 million related to strikes on Iran. The majority of these wallets were funded in the last 24 hours and specifically bet for February 28, buying 'yes' hours before the strike.

Kalshi posted on X about the volatility in markets related to the ousting of Iranian Supreme Leader Ali Khamenei, with the odds of his ouster surging to 68%. However, Kalshi clarified that its markets do not settle on death and will resolve based on the last traded price prior to confirmed reporting of death.

Polymarket had at least $200 million staked on four wagers related to US strikes on Iran, regime change, or Khamenei's death. Meanwhile, Kalshi recorded almost $55 million in contracts related to whether or not Khamenei would be 'out' in the next several months before activity in those markets was halted.

The incidents have raised concerns about the regulation of prediction markets and their potential to incentivize harm or death. Several Democratic senators have called for action against contracts that 'incentivize physical injury or death,' citing Polymarket contracts.