Shocking bets on Ayatollah Khamenei's death in prediction markets trigger US lawmakers' outrage

Polymarket operates offshore and is not regulated like traditional US gambling platforms, while Kalshi faced backlash for how it resolved its ‘Khamenei out’ market given regulatory constraints.

Prediction markets such as Polymarket and Kalshi have come under intense scrutiny after large wagers were placed on the removal of Iran's Supreme Leader, Ayatollah Ali Khamenei, in the days surrounding joint US-Israeli air strikes that killed him.

The surge in activity has prompted calls from Democratic lawmakers to ban markets tied to military operations or leadership changes that could benefit from insider knowledge or confidential information.

A Reuters review found that trading volume related to the conflict on the Polymarket platform reached into the hundreds of millions of dollars, including significant contracts tied to the timing of attacks and the question of whether Khamenei would be removed from power.

Some analytics firms reported that a handful of accounts made substantial profits from these bets, raising concerns about fairness and possible insider advantage.

Several Democratic lawmakers described the situation as "insane" and said they planned to introduce legislation aimed at curbing or banning betting on events linked to war, assassinations or other violent outcomes.

Critics argue that allowing wagers on geopolitical violence creates ethical and legal issues and may incentivise the exploitation of non-public information.

Polymarket operates offshore and is not regulated like traditional US gambling platforms, while Kalshi faced backlash for how it resolved its "Khamenei out" market given regulatory constraints. The controversy has intensified debate over whether prediction markets should be allowed to host contracts that tie financial gain to real-world conflict outcomes.