Geopolitics bets hit a record as Iran war escalates

Conflict-related betting on prediction markets hit a record last week as traders piled into wagers on the US-Israeli strikes on Iran, while blockchain analysts flagged suspicious activity and US lawmakers called for a crackdown.

Bettors placed $US425.4 million ($598 million) in wagers on geopolitics questions on Polymarket in the week ending March 1, up from $US163.9 million the week before, according to user-compiled data on Dune Analytics. Across the site, total wagering reached a record $US2.4 billion, up from $US1.8 billion a week earlier.

The growth comes as critics question the legality and ethics of betting on military conflict. US regulations are broadly understood to prohibit financial contracts tied to war, but Polymarket’s main exchange operates offshore and beyond the oversight of US regulators.

After US and Israeli bombs fell on Iran on Saturday, blockchain researchers pointed to several Polymarket accounts whose trading showed signs consistent with advance knowledge of the attacks.

Prediction markets have become more popular over the past year in large part because they offer a new way to bet on sports and crypto prices. Those remain the largest categories on Polymarket and Kalshi, but both companies have long promoted their platforms as a venue for making trades on politics and global events.

Geopolitics made up about 18 per cent of all wagering on Polymarket last week, up from roughly 9 per cent just a week earlier.

Nine of the 10 most-traded geopolitics markets last week were tied to Iran, according to blockchain data. Contracts linked to the timing of US strikes on Iran dominated the list, with each drawing between $US8 million and $US53 million in volume.

The most active geopolitics market asked whether Ayatollah Ali Khamenei would be out as Iran’s supreme leader by February 28. That contract drew $US84 million in volume on Polymarket during the week, out of $US104 million total. Khamenei was killed over the weekend.

Polymarket didn’t immediately respond to a request for comment on the data.

The US Commodity Futures Trading Commission (CFTC), which regulates prediction markets in the US, bars contracts tied to assassination, terrorism or war – themes Polymarket, as an offshore venue, continues to list.

Kalshi Inc, a CFTC-regulated platform, also offered a market on when Khamenei would cease serving as supreme leader. Its rules included an exception that would prevent the market from resolving if Khamenei died, instead settling at the last price before death.

Compared to Polymarket, Kalshi lists fewer contracts tied to Iran because it faces more restrictions under CFTC rules. Of the top 10 markets on Kalshi by weekly volume on Monday, none was tracking a geopolitical event.

Democratic lawmakers have urged the CFTC to clamp down on contracts tied to war and assassination. In a letter to chair Michael Selig, they demanded a response by March 9.

Bloomberg

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