Two U.S. Democratic lawmakers are drafting legislation intended to restrict certain prediction market activity after a series of high-profile wagers appeared to coincide with U.S.-Israeli military action in Iran. Representative Mike Levin and Senator Chris Murphy are collaborating on the measure, with Levin saying enforcement gaps need to be closed to prevent people from profiting on advance knowledge of military operations.
Levin, a California congressman, said: "It’s unbelievably clear to me that if anyone is using prior knowledge of military action for financial gain that should be absolutely illegal." He and Murphy are focusing their attention on platforms that enable bets on discrete future events, including sites such as Polymarket and Kalshi, which have drawn growing scrutiny from lawmakers and the public.
Lawmakers point to provisions of the Commodity Exchange Act that bar event contracts considered "contrary to the public interest" - a category that explicitly includes wagers tied to war, terrorism, or assassination - but say those rules do not go far enough to address the mechanics and scale of modern prediction markets. Levin argues that additional legislative language is necessary to capture markets that may incentivize disclosure of classified information or encourage conflict.
The criticism of prediction markets intensified after a string of lucrative trades tied to geopolitical outcomes. Last month, six Democratic senators publicly criticized the platforms after a trader reportedly made roughly $410,000 in profit wagering on the removal of Venezuelan President Nicolas Maduro. More recently, analytics firm Bubblemaps reported that six accounts collected about $1.2 million in profits from Polymarket bets on the removal of Iran’s Supreme Leader Ayatollah Khamenei just hours before he was killed in the air strikes.
Responding on social media, Levin and Murphy said those trades suggested insiders were profiting from the war. Murphy said such trades should not be legal and indicated he intended to introduce legislation as soon as possible. Levin added: "There is no good way for people to be betting on war and death," and said he hopes to gather a coalition of lawmakers who share his concerns.
Polymarket has already taken steps to remove certain markets. On Wednesday the platform removed bets on the likelihood of a nuclear explosion anywhere in the world following online criticism.
While the proposed bill introduces a fresh legislative push, observers note it is unlikely to become law in the near term. Nonetheless, the effort places additional political pressure on prediction market operators and shines a spotlight on how digital wagering platforms intersect with national security and classified information.
Sectors affected: Financial technology platforms that host prediction markets, regulatory and legal frameworks governing derivatives and event contracts, and broader market integrity oversight mechanisms.