How people are making millions on the Iran war

Bettors on prediction markets like Polymarket and Kalshi have wagered hundreds of millions of dollars on the current conflict in Iran. Which means lots and lots of folks are trying to get rich betting on wars. 

In the lead-up to the United States and Israel’s attack on Iran, prediction markets saw a frenzy of activity tied to the conflict. Users of prediction markets were putting down money on when the first bombs would drop, as well as where the bombs might hit. But one of the most active markets had people betting on whether Iranian Supreme Leader Ayatollah ​Ali Khamenei would leave office before March 1. He was killed on February 28. 

“So on Polymarket, there’s a ton of different bets you can make,” Kate Knibbs, a senior writer for Wired, told Today, Explained co-host Sean Rameswaram. “I think they actually just took down some of the markets for missile strikes because of all the backlash that has been going on in response to the fact that you can bet on war because it’s so dystopian.”

This sort of thing has happened in sports and sports betting for years. And it seems likely to happen much more often in response to news events thanks to prediction markets too. Because as Knibbs spelled out to Rameswaram, these markets are becoming increasingly popular. They have the Trump administration on their side. And folks across the globe seem absorbed with the idea of betting on war. 

Below is an excerpt of their conversation, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get podcasts, including Apple Podcasts, Pandora, and Spotify.

What kind of bets are people making on the war in Iran? 

Especially on Polymarket, there’s a ton of different bets you can make. You could bet on when the Strait of Hormuz is gonna open, or whether it’s gonna open. You could bet on missile strikes. There was famously this market about whether the supreme leader would remain in power or not. There were markets on who his successor was going to be. 

It’s almost like anything you think might be a market, probably is a market, at least on Polymarket, because Kalshi has some stricter rules and its offerings are not quite as morbid. You can’t bet on assassinations, for instance, there. But Polymarket largely exists outside of the United States, so it’s less beholden to US law, or at least that’s how it’s acting. 

How much money are people making on these kinds of bets right now? Do we know? 

“Donald Trump Jr. is an adviser to both Kalshi and Polymarket. The Trump family is planning on launching their own prediction market called Truth Predict.”

With Polymarket, you can see the wallets of the traders. You’re able to see pretty much precisely how much some people are profiting. And you know, like in all gambling, most people who are participating in these markets are actually losing money. 

So the winners are this tiny little percentage. And the winners who are winning big are an even smaller slice of that small slice. So we have a very select group of people who are making, in some cases millions and millions of dollars on war.

And some of those people making millions and millions of dollars kind of looked suspicious, right? Because, I don’t know, they made a big bet the night before the war started that we’d be going to war in a few hours and then they made hundreds of thousands of dollars. 

Yeah. Especially because in a lot of those cases, it wasn’t as though they had this long history of just being super smart and savvy at geopolitical contracts. 

In a lot of these cases, the wallets were just created within days of making these highly suspect trades. And so a lot of different organizations that can trace crypto wallets have been looking at the patterns that are emerging around these war markets and basically saying, “Look, we don’t know exactly who is doing this, but it’s probably insider trading because there’s just no way that these people are popping up out of nowhere to drop a bunch of money and make these incredibly precise bets and profit and then disappear into the ether.”

Is that allowed? Is that within the parameters of what’s allowed on these betting markets? 

It seems like it shouldn’t be, right? It seems morally repugnant. It seems obviously ethically flawed. But when it comes to what is the definition of insider trading, we typically think of it in terms of someone having nonpublic material information about a company that will change how their stocks perform. It has a very specific definition when you’re talking about SEC stock market stuff. 

Prediction markets are regulated differently and there’s sort of a fuzziness around what constitutes non-public material information. If there’s a Google Insider who’s insider trading, it’s kind of obvious, “Oh, they learned these specific facts about how the company is gonna perform.” When it comes to prediction markets, there’s markets on everything. So who’s an insider?

There’s a class action lawsuit against Kalshi right now. What’s going on there? 

Okay, so there are actually a bunch of different class action lawsuits against Kalshi. 

Some of them have been ongoing for a while and are arguing that plaintiffs have been preyed upon by Kalshi because it’s secretly an illegal gambling organization. And those are more like general interest or class actions. 

I think what you’re thinking of is the one that just came out that’s specifically tied to the Khomeini market, where a bunch of people are really, really pissed because when the Ayatollah died, they thought that they were gonna profit because they had bet “yes” in this market that said that he would no longer be in power by “X” date. And then Kalshi came out and said, “Uh, no, we actually don’t allow betting on death. And that’s been in the fine print of our rules this entire time.” So instead of profiting, people got their money back, but they didn’t get the money that they thought that they deserved for correctly participating in the market. And so they’re now suing. 

Do you think what’s happened in the past couple weeks and what people have seen with these sort of brand-new accounts, making tons of money off of a war that’s just starting and wildly controversial is going to be the driving force behind some regulation? 

Well, right now the Trump administration is very friendly towards prediction markets. Donald Trump Jr. is an adviser to both Kalshi and Polymarket. The Trump family is planning on launching their own prediction market called Truth Predict like a spin-off of Truth Social. And the White House hasn’t been commenting directly on the prediction market stuff, but the CFTC, the Commodity Futures Trading Commission, which is the government agency that regulates these on a federal level, the chairman Michael Selig has like come out swinging saying, “This is our turf. All of these efforts on the state level to make all of these companies abide by state gambling regulations and to put guardrails up, those efforts are something we don’t stand by. We actually strongly disagree with them.”  

I think there’s over 50 different lawsuits flying around about this right now. Some of them, the states stand a chance at winning. And so if the states win, it’ll set a precedent and these prediction markets will no longer be able to operate as they currently are. And that could really change things. But other than that, I don’t see, I don’t see these being curbed in any real way soon.