Prediction markets wagers on Iran war, nuclear detonation

The Iran war has shone a light on what prediction markets regard as unacceptable subjects for betting, as they faced backlash when users placed hundreds of millions of wagers on everything from missile strikes to regime change.

Polymarket last week archived markets that had allowed bets on the timing of a nuclear detonation, after the contracts attracted hundreds of thousands of dollars.

Most of the contracts fell under a market titled “Nuclear weapon detonation by…?” that allowed users to wager on whether the event would occur by a certain date, according to webpages saved in the Internet Archive’s Wayback Machine.

The removal of nuclear-related markets came hours after the company reportedly posted — and later deleted — odds on X showing roughly a 22% probability of a detonation by year-end.

The bets drew outcry online and come as some makers propose tighter regulations and oversight of the fast-growing prediction industry, which allows users to bet on the outcomes of a wide range of events. 

Polymarket did not state the reasons for the removals. It did not immediately respond to a request for comment from CNBC.

Over the weekend, the company’s founder and CEO, Shayne Coplan, was asked about some of the broader controversy regarding prediction markets concerning geopolitical conflicts like Iran at the MIT Sloan Sports Analytics Conference.

Coplan said it was a “complicated question,” but said that prediction markets serve a powerful informational function and value proposition, including in war zones.

He also dismissed some of the criticism as “more money, more problems.” “There’s still a lot of resistance to innovation that kind of seems jarring to begin with … that’s what makes it innovative and disruptive,” he said.

The Commodity Futures Trading Commission is the main regulator of U.S. prediction markets like Polymarket and Kalshi, with trades on those platforms treated as financial derivatives contracts.

Polymarket’s main international exchange operates offshore, but the company is planning a separate CFTC-regulated U.S. version of its platform.

U.S.-based prediction sites like Manifold Markets were still allowing bets on a nuclear detonation as this article went live.

CNBC did not identify such bets on larger platforms like Kalshi, the company has not been free of Iran-related controversy.

Earlier, Kalshi faced backlash over a multi-million dollar market on whether Iran’s supreme leader, Ali Khamenei, would be ousted. He was later confirmed to have been killed in the first wave of Israeli and US air strikes on Feb. 28.

The company ultimately issued refunds on the market, citing regulations barring wagers on death.

In a statement to CNBC, Kalshi said it “doesn’t allow markets directly tied to death.”

Last week, Sen. Chris Murphy (D-Conn.) and Rep. Mike Levin (D-Calif.) proposed a bill that would restrict or prohibit markets resolving on military actions, regime change, or deaths that could incentivize conflict or reward access to classified information.

US lawmakers have also suggested that the markets allow room for insider trading and corruption.

Such concerns have long surrounded the prediction market boom, with some lawmakers accusing Kalshi and Polymarket of allowing well-connected bettors to profit on non-public information.

Senator Merkley and Klobuchar also introduced the End Prediction Market Corruption Act last week, which would bar the president, vice president, members of Congress, and their immediate families from trading event contracts on prediction platforms.

The measure would also impose fines and profit clawbacks for violations, citing well-timed wagers on US strikes and Iranian leadership changes that netted some traders hundreds of thousands of dollars.

That comes after crypto-analytics firm Bubblemaps identified what it called “six suspected insiders” who made a $1.2 million wager that the US would strike Iran. A single multi-outcome prediction market on the timing of strikes had accumulated over half a billion dollars in bets on Polymarket, which occurred on Feb. 28.

Merkley and Klobuchar’s bill, however, does not have any Republican co-sponsors, and GOP lawmakers in Congress have not yet signaled their support for such proposals.

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.

— CNBC’s Garrett Downs contributed to this report