Profiteering from Conflict: Bets on Khamenei’s Death Spark Outcry

Recent U.S.-Israeli strikes against Iran, resulting in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei, have ignited controversy surrounding prediction markets and the potential for individuals to profit from geopolitical instability and violence. Trades on platforms like Polymarket and Kalshi have drawn scrutiny from lawmakers and raised ethical concerns about betting on events with life-or-death consequences.

Lucrative Bets and Congressional Scrutiny

An account on Polymarket reportedly made over $553,000 by betting on the removal of Ayatollah Ali Khamenei shortly before his death in the strikes. CNN reported this activity, which prompted criticism from members of Congress. Senator Chris Murphy (D-Conn.) expressed outrage on X (formerly Twitter), stating, “It’s insane this is legal,” and accusing individuals close to former President Trump of profiting from war and death. He announced plans to introduce legislation to outlaw such practices.

Trump Family Ties to Polymarket

The White House has denied any involvement of individuals within the Trump administration in the profitable trades. However, connections between the Trump family and Polymarket have surfaced. Donald Trump Jr. Serves as an advisor to Polymarket, and his venture capital firm, 1789 Capital, has invested millions in the company. The Trump administration reportedly dropped two federal investigations into Polymarket that were initiated during President Biden’s administration.

Past Incidents and Regulatory Concerns

This is not an isolated incident. In January, an anonymous trader made substantial profits by placing well-timed bets ahead of the arrest of Venezuelan leader Nicolás Maduro. In Israel, two individuals were charged with using classified information to bet on attacks on Iran following a 12-day conflict in June. CNN details these previous instances of potentially illicit activity within prediction markets.

Market Responses and Regulatory Gray Areas

The majority of the trading related to Khamenei’s potential removal occurred on an overseas Polymarket exchange, placing it outside the immediate reach of U.S. Regulators. While Polymarket is seeking to launch a U.S.-based platform, many American traders currently access the site through virtual private networks (VPNs) to mask their location.

Most prediction markets are regulated by the Commodity Futures Trading Commission (CFTC), which classifies them as “futures contracts” rather than gambling. However, U.S. Commodity trading laws prohibit trades based on events like death and war, as they create a financial incentive for violence and instability.

Kalshi’s Response and Trader Outcry

Kalshi, another prediction market, paused trading on a market tied to Khamenei’s removal after his death and ultimately refunded fees to traders. CEO Tarek Mansour explained on X that the company does not list markets directly tied to death and designs rules to prevent profiting from such events. CNN reported on this decision, which sparked outrage among traders who felt they had been misled after the company heavily promoted the market.

Calls for Congressional Action

Amanda Fischer, a former Securities and Exchange Commission official now with Better Markets, emphasized the need for congressional action to address the “perverse incentives and chaos” caused by betting on death and destruction. She argued that prediction markets are creating opportunities to bet on events that are essentially proxies for war or assassination and that such markets should not exist.