Prediction markets handling more than $44bn in trades are facing renewed calls for regulation amid controversy over wagers tied to military conflicts involving Iran, Israel and Venezuela.
The platforms, led by firms like Polymarket and Kalshi, have rapidly expanded over the past year, allowing users to bet on everything from sports outcomes to interest rate decisions and the outcome of elections. But it is bets on potential military actions that have drawn the sharpest criticism.
Public Citizen, a consumer advocacy group, recently filed a complaint challenging the legality of war-related prediction markets. The group argues that such bets violate federal rules prohibiting trading on contracts involving illegal activities, gaming or assassination.
What the Right Is Saying
Conservatives and free-market advocates have largely defended prediction markets as a matter of economic liberty. Many argue the platforms serve legitimate functions by allowing businesses to hedge against event-driven risks.
CFTC Chairman Michael Selig, appointed by President Trump, has defended prediction markets in legal battles with states. In a recent opinion piece, he condemned what he called overzealous state regulation, arguing that event contracts serve legitimate economic functions.
It's clear that Americans like the product and want to participate, Selig wrote. He emphasized that platforms must still follow rules but argued against treating prediction markets like traditional gambling operations.
Some Republicans have also expressed concern about the growth of these platforms, particularly as traditional gaming firms have stepped up lobbying efforts. Former Trump official Mick Mulvaney has been enlisted by traditional gaming companies to advocate for stricter oversight.
What the Left Is Saying
Progressive advocacy groups and consumer advocates say prediction markets are essentially gambling operations dressed up as financial exchanges to avoid stricter state regulations. They argue the platforms enable potentially illegal war profiteering and create opportunities for insider trading.
You have now opened up gambling basically on almost anything and it has turned into this very, very gruesome type of thing on the death of a head of state, said Craig Holman, a government affairs lobbyist at Public Citizen.
Groups like Better Markets, which advocates for financial reform, say prediction markets should be regulated like traditional gambling rather than treated as legitimate exchanges. They have supported state efforts to assert jurisdiction over these platforms.
What the Numbers Show
Prediction markets have processed more than $44bn in total trades over the last year, according to industry data. The market has grown rapidly since 2024 when legal changes opened the door for election betting.
Polymarket alone has hosted an estimated $500m in bets related to potential conflict with Iran. At one point, the platform offered a market on the odds of nuclear detonation before removing it after social media scrutiny.
Kalshi's market on Iranian Supreme Leader Ayatollah Ali Khamenei's status drew $54m in trades before being cancelled. The platform ultimately refunded users after deciding the market violated its terms against betting directly on someone's death.
The CFTC proposed a ban on sports and election-related contracts during the Biden administration, but that regulatory effort stalled after a court defeat. Last month, the agency said it would withdraw the proposed ban.
The Bottom Line
The debate over prediction market regulation centers on whether these platforms should be treated as financial exchanges or gambling operations. That classification determines which regulators have authority and what rules apply.
States are increasingly asserting their right to regulate these platforms like other gaming firms, while the CFTC has taken the side of prediction market companies in legal fights. The regulatory landscape remains fragmented.
Critics say the war bets raise serious ethical and national security concerns, while supporters argue markets simply reflect public sentiment about real-world events. As the industry grows, expect continued legal and political battles over who should oversee these platforms.