After $679 million in Iran war bets, Democrats move to ban prediction markets tied to military action

Following nearly $679 million wagered on contracts related to potential US-Israel military action against Iran, including bets on the removal of Ayatollah Khamenei, Democratic lawmakers are pursuing legislative action to curb prediction markets. Efforts led by Rep. Mike Levin and Sen. Chris Murphy aim to ban war-related contracts, while Senators Jeff Merkley and Amy Klobuchar propose barring elected and senior executive officials from trading event contracts altogether, citing concerns over insider trading and national security vulnerabilities.

The controversy highlights a divide between regulated US venues like Kalshi, which bans death-related markets, and offshore crypto platforms like Polymarket, where much of the controversial trading occurred. The Commodity Futures Trading Commission (CFTC) is also developing new rulemaking, though Chairman Michael Selig prefers defining rules to outright prohibition, fearing a ban would simply push activity offshore. The legislative response involves three tracks: banning war/death contracts, enacting ethics rules for officials, and the CFTC's regulatory framework. While a blanket ban is unlikely given Congressional division and institutional investment interest, the Iran wagers have galvanized opposition, suggesting that contracts tied to war and sensitive government actions are likely to be the first casualties in the evolving regulatory landscape.

(Source：CryptoSlate)