New ‘prediction markets’ in spotlight after people profit from war in Iran

LOS ANGELES () — When the United States launched its first strikes on Iran, missiles weren’t the only things taking off. Online prediction markets, where users wager on the likelihood of realworld events, saw a surge in activity from people who had bet the attack would happen on Saturday.

Some of those bettors walked away with sizable profits, raising new questions about whether Americans should be allowed to make money from sensitive national security decisions.

“We really shouldn’t be allowing people who have knowledge of America’s or any country’s military decisions being able to profit directly off of those decisions,” said Kevin Williams, a professor of economics at Occidental College.

Prediction platforms such as Kalshi and Polymarket allow users to “invest” in the odds of everything from a U.S. invasion of Iran to the winner of the Best Picture Oscar – or even whether Jeffrey Epstein is still alive. Williams argues that despite the investmentstyle branding, the platforms function far more like gambling sites.

“The fact that these markets are calling themselves investing platforms, when really they look a lot more like gambling platforms, I think should be a concern,” he said.

Williams warns that betting on life-or-death geopolitical events creates a moral hazard and could lead to classified or restricted information being exposed to enemies of the state. That risk, he said, makes the current regulatory framework inadequate.

Prediction markets fall under federal oversight, but Williams believes the rules are too thin and that states, which already regulate gambling, may be better equipped to police them.

“Even though it’s hard to know where people are taking these actions from – it’s hard to regulate things at the state level on the internet – but state boards are probably better set up to deal with retail gamblers or retail investors,” he said.

Whether stricter rules are coming remains unclear. Williams argues that without stronger oversight, users face heightened financial and security risks.

“To the extent that these markets are not being regulated right now, I think that does make them more dangerous and people more susceptible to losing their money,” he said.

Both Kalshi and Polymarket are legal in California, which does not allow online sports betting.