Kalshi, Polymarket Under Fire For War-Related Trades After U.S. Iran Strike; Regulators Ready To Pounce

By Bill Speros

Mar 1st, 2026 3:40 PM EST

Both Kalshi and Polymarket are under fires for war-related trades after the U.S. and Israel strike on Iran. Meanwhile, elected officials and gaming regulators are expected to push for more scrutiny on prediction markets.

Following President Trump’s early morning announcement Saturday, a market on the date of the next U.S. Iran Strike on Polymarket resolved after more than half a billion dollars in contracts had been traded.

Kalshi's market on “Ali Khamenei out as Supreme Leader?” drew fire because of his death forcing the market to settle. By law, U.S.-based prediction markets are not allowed to offer trades based on death.

Still, a fierce public, political and regulatory backlash is all but certain due to Kalshi and Polymarket war-related trades after the U.S. strike on Iran.

Prediction markets may soon long for the day when their most intense battles raged over non-consequential outcomes like the Super Bowl winner and Bad Bunny's first song at halftime.

Markets Move Fast. Politics Moves Faster.

On Polymarket, its “U.S. strikes Iran by . . . ” markets — which handled more than $529 million in volume — resolved to “Yes” after the strike was confirmed.

A trader on Polymarket named "Magamyman" made more than $700,000 trading on the U.S. strike - in some cases - less than 2 hours before news of the attacks were made public. His trade of 143,393.0 shares of Khamenei out as Supreme Leader of Iran by March 31? at 14 cents turned a profit of $123,102.89.

A trade of 861,154.2 shares at "Yes" in the US strikes Iran by February 28, 2026? for 27.4 cents per share netted $195,198.47. So many shares on the Feb 28 strike represent a massive amount of liquidity for a niche political market, suggesting high confidence or high-level information.

And the US strikes Iran by March 31, 2026? market, he bought 376,566.2 shares of "Yes: at 56.1¢. That turned a profit of $165,177.74.

Among his other war market related trades: Israel strikes Iran by January 31, 2026? 278,079.6 shares of "No" at 68.7 cents for a profit of $165,177.74.

US strikes Iran by March 1, 2026? 78,000.0 shares of "Yes" at 30.6 cents for a profit of $54,105.32.

US strikes Iran by March 15, 2026? 83,438.2 shares of "Yes" at 53.8 cents for a profit of $38,544.25.

"Insider trading in broad daylight. This should be illegal no question. Pricks like this are cashing in on our service members dying. Disgusting and immoral," Sen. Ruben Gallego (D-Ariz.) posted on X in reaction to some of "Magamyman's" trades.

Political Leaders Blasted War Markets Before U.S. Strike

While Kalshi does not list contracts on specific military actions, its market asking whether “Ali Khamenei out as Supreme Leader?” spiked to 68 cents to win $1 before September 1 amid reports of a strike on his compound. It pulled back to 59 cents before reports of Khamenei's death. Trade was subsequently halted. That market handled $54,513,052 since launching January 9.

Even before the bombs fell, Washington was already circling.

Connecticut Sen. Chris Murphy Friday night prophetically posted on X that he was:

“Working on legislation to ban corrupt and destabilizing prediction markets, where insiders who know the outcome (especially in government) can rig the game to favor certain bets.”

His post included a screenshot of Polymarket’s “Will Israel Strike Gaza?” market.

Kalshi CEO Tarek Mansour fired back:

“Senator, regulated prediction markets are not allowed to do war markets. The market you're posting is unregulated and offshore.”

The platform reiterated that distinction Saturday in an X post touting its "Khamenei Out" market:

“Reminder: Kalshi does not offer markets that settle on death. If Ali Khamenei dies, the market will resolve based on the last traded price prior to confirmed reporting of death.”

Scrutiny on Kalshi and Polymarket war-related trades rose after the U.S. strike on Iran.

Kalshi CEO Defends Market On Iranian Leader

Mansour posted a lengthy explanation on concerning the "Khamenei Out" market on X:

We don’t list markets directly tied to death. When there are markets where potential outcomes involve death, we design the rules to prevent people from profiting from death. That is what we did here.

I know some of you disagree and prefer that we list these markets without a death carveout because it keeps the rules simple and because many traditional markets, like oil futures, can be proxy markets for war and death. But we believe that’s different than having a market directly settling on someone’s death, which is not allowed for US regulated entities.

What’s the point of the market, then?

A market on Ali Khamenei out as Supreme Leader was important because leadership changes in Iran have major impact on the world order:

Geopolitical implications,

Economic consequences

National security considerations

Oil and commodity prices, many of which move based on news and expectations around this outcome

And it’s always possible for a ruler to step down or transition power without death, even in autocracies. It just happened in Venezuela.

In these instances, we make the caveat clear in the rules and in the market page, but today is a good learning that we can do more in terms of improving the UX and adding more ways to surface the rules. We are committed to improving. In the meantime, here’s what we’re going to do:

We are reimbursing all fees from this market

If you have a position from before Khamenei died, you will be paid out on the last-traded price before his death. (This was clear in our rules)

If you have a position from after he died, we’re going to fully reimburse your cost of entry

Truth, Optics, And The Regulatory War

Truth is often the first casualty in war. It’s taken hits in the fight over prediction markets, too.

Kalshi fired "the shot heard 'round the sports betting world" against regulated legacy operators when it self-certified sports-event contracts on January 22, 2025. Since then, sports contracts have accounted for as much as 90% of its trading volume.

That legal struggle appears headed toward the Supreme Court. A point we noted last year here, here, and here.

On one side: state regulators, governors, attorneys general, most Democratic lawmakers, legacy gambling operators, the NFL (for now), the NBA, and parts of the sportsbook industry.

On the other: the CFTC, the Trump administration, most Republicans in Congress, prediction markets, the NHL, UFC/TKO, MLS, and aligned operators. MLB remains neutral — for now. NASCAR is considering an integrity-based partnership with Robinhood, Polymarket, and Kalshi.

At issue: tax revenue, whether sports-event contracts are de facto sports betting, and which authority — states or federal commodities regulators — gets to decide.

This Time, The Optics Are Different

Trading on game outcomes is one thing.

Trading on potential military action — that includes American casualties — is another.

The sheer volume tied to the Iran strike changes the optics. Regulators who have so far issued warnings about license risks for sportsbook operators dabbling in prediction markets may feel pressure to act.

As Kalshinomics co-founder “probaaron” noted on X:

War markets are simultaneously one of the most important and most uncomfortable things prediction markets have produced… The conversation has polarized into ‘pure evil’ versus ‘markets should price anything,’ without sitting in the nuance.

Polymarket remains unapologetic. On paper, none of the Iran-related trades were made by U.S. users — though VPN questions linger.

The company argues such markets provide informational value in volatile moments:

Note on Middle East Markets: The promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society. That ability is particularly invaluable in gut-wrenching times like today. After discussing with those directly affected by the attacks, who had dozens of questions, we realized that prediction markets could give them the answers they needed in ways TV news and 𝕏 could not.

Supporters frame these contracts as hedging tools to offset negative outcomes in financial and commodities markets. Critics warn they could incentivize manipulation — or allow adversarial actors to influence perception by placing large directional trades.

The $20,000 Maduro Polymarket contract that turned into $400,000 after his capture was an early flashpoint — especially since the trader had never previously used the platform.

The Legal Line

Last week, six Democratic senators sent a letter to CFTC Chairman Michael Selig demanding clarity on enforcement of war-related contracts.

They demanded Selig to “reiterate that the CFTC will categorically prohibit any contract that resolves upon or closely correlates to an individual’s death.”

Under 17 CFR 40.11, CFTC-regulated exchanges such as Kalshi are barred from listing contracts involving terrorism, assassination, or war.

That’s why Kalshi does not offer a “U.S. strikes Iran” market.

Polymarket, operating offshore, is not bound by that framework.

The public, however, rarely distinguishes between regulated exchanges and offshore platforms — much like bettors often conflate licensed sportsbooks with illegal books.

Narratives often outrun nuance.

All it would take is one national headline — “Millions Profit From Iran Strike Thanks To Prediction Markets” — to trigger a political firestorm.

And suddenly, the white-hot sports-event contract debate looks as quaint as your grandmother's kitchen. And nearly as comforting.

(A version of this story originally ran on February 28 but was updated due to new developments.)

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