As the US military launched an attack on Iran and news of Iran's Supreme Leader Khamenei's death spread, the market for contracts predicting his removal surged to $54.5 million. Kalshi immediately suspended the market after confirming the news and refunded the fees in full, but a group of traders who had bet early on the platform had already made millions in profits. Simply put, some people made a fortune by knowing the news in advance, while others lost $6.4 million in one day by betting on the wrong direction. This incident has sparked intense scrutiny of prediction market regulation by US politicians and academics, with renewed loud accusations of insider trading.
Event timeline: Odds soared from 27% to 61% within 15 hours
On the evening of February 27, the contract odds for Khamenei's removal were at 27%. By 9 AM on February 28, before the news of the US attack was released, the odds had risen to 61%. At 1:37 PM, Trump announced Khamenei's death, about 15 hours ahead of official Iranian media. Kalshi then suspended the market citing company rules. Before the suspension, the contract trading volume reached $54.5 million, while Polymarket's similar derivative trading volume exceeded $529 million. Kalshi's CEO stated that contracts involving war, terrorism, and assassination are prohibited under CFTC rules, but the company chose not to include a "death clause" because traditional markets (such as oil futures) are inherently proxies for war and death.
Insider trading concerns: Lawmaker condemns "broad daylight"
Trading data has raised concerns about insider trading. A user named "Magamyman" placed a bet 71 minutes before the attack news broke, earning $515,000. Another user "Planktonbets" netted $174,000, and "Neodbs" turned an investment of less than $10,000 into a 9-fold return. However, there were also losers— "Anoin123" lost over $6.4 million in one day by betting that the US would not invade on a specific date. Connecticut Senator Murphy is pushing for legislation to establish federal prediction market regulatory standards, while Arizona Senator Gallego bluntly stated that this was "insider trading in broad daylight, which should be illegal." Legal experts criticized the CFTC chairman for failing to implement effective standards to enforce insider trading rules.
Regulatory game: Death contracts ring alarm bells
As of the afternoon of March 5, Kalshi and Polymarket still had more than a dozen contracts about the Iran conflict. Kalshi's contract on "Iran's next Supreme Leader" had already exceeded $7.75 million in trading volume, while Polymarket had withdrawn a contract on "whether a nuclear war will break out this year" (trading volume exceeded $1 million). This incident once again highlights the regulatory vacuum in prediction markets in the face of major geopolitical events. The death of 86-year-old Khamenei, who had led Iran for nearly 40 years, may become a key point in pushing for changes in the regulatory framework of prediction markets in the US and globally. Interested in the latest regulatory developments in prediction markets? PASA official website continues to track.
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