Prediction markets like Polymarket let users bet on future events. At least one trader has been remarkably prescient about U.S. military operations in Iran, feeding fears that prediction markets are being manipulated by insiders with closely held knowledge of government plans.
The anonymous trader has made “dozens of well-timed Polymarket bets” on Iran that earned them nearly $1 million since 2024, said CNN. They won 93% of their bets “even though the events they predicted were unannounced military operations.” Many of the bets “came hours before U.S. or Israeli military activity” against Iran. That pattern is “strong signaling of insider activity” that looks “pretty suspicious,” Nick Vaiman, the CEO of the Bubblemaps analytics firm, said to the outlet. And it came after another trader made $400,000 earlier this year predicting the January U.S. strike that captured Venezuelan leader Nicolás Maduro.
Other markets are also seeing suspicious activity. A “spike” in oil futures trading totaling $580 million occurred right before President Donald Trump’s Monday announcement that he was seeking negotiations with Iran, said CBS News. The unusual burst of activity was“certainly enough to raise eyebrows,” Stephen Piepgrass, a partner at Troutman Pepper Locke, told CBS. The indication of insider trading in oil and on prediction markets is drawing scrutiny from lawmakers and regulators.
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Prediction markets “are a national security threat,” Matt Motta and Robert Ralston said at Responsible Statecraft. Insider trading raises obvious “fairness” issues, but it also creates the possibility that government officials might prioritize personal gain over national security. Officials with power to influence international affairs could “alter their actions in order to make a profit on a prediction market.” Prediction markets may also “become sources of intelligence for adversaries” by signaling when military action is about to happen. Congress should ban insider bets. “U.S. national security depends on it.”
Profiting from insider information about national security is “effectively a form of treason,” Paul Krugman said on Substack. There is a “blurry line” between using official secrets to make “lucrative trades” and selling those secrets “to the highest bidder.” And it raises broader questions of whether “decisions about war and peace” are being influenced by profit or the national interest. If that seems unthinkable, “you just haven’t been paying attention.”
What next?
A Polymarket trader who predicted the Iran war is “now betting on a ceasefire by next week,” said MarketWatch. Prediction markets are taking steps to tighten the guardrails. Kalshi recently banned two traders for insider trading, the “first time the company had publicly revealed investigations” into the issue on its platform. Polymarket, meanwhile, has updated its rules to ban trading when a user possesses “stolen confidential information” or “has the ability to influence the outcome of the event.”
Republicans and Democrats in Congress are “pressing” for legislation to “crack down on policymakers placing wagers” on the markets, said The New York Times. And if Washington does not act, states will. California Gov. Gavin Newsom announced Monday he will sign an order banning state officials from insider trading on the prediction markets.
