US lawmakers are drafting legislation to regulate prediction markets, citing concerns about possible insider trading. The move follows large, well-timed bets on the exact timing of US military strikes on Iran placed on the Polymarket platform. Senator Chris Murphy suggested individuals with prior knowledge may have profited, raising alarms about national security implications.
US Democratic lawmakers are working on a bill to police prediction markets after raising insider trading concerns over bets made on the timing of Israeli and US strikes on Iran. Democrat Senator Chris Murphy stated it is probable that people with inside information placed these wagers.
In a video posted to X, Murphy claimed White House insiders made a “very specific bet” on Friday that the US would go to war with Iran on Saturday. He warned that allowing such bets could create a perverse incentive for those close to power to push for conflict for financial gain.
A number of bets on Polymarket were widely circulated, where six newly-created accounts reportedly earned around $1 million. In several cases, bets were made just hours before explosions were first reported in Tehran.
Bets on US strikes in Iran have so far generated $529 million in volume on Polymarket. Last month, a trader on the platform made about $400,000 from a well-timed wager on the capture of Venezuelan President Nicolás Maduro.
Reuters reported that Murphy and Democratic House Representative Mike Levin are working on the bill, intensifying pressure on prediction markets. “It’s unbelievably clear to me that if anyone is using prior knowledge of military action for financial gain, that should be absolutely illegal,” Levin stated.
He added that existing commodity laws ban event contracts tied to war or terrorism, but the rules give prediction markets too much freedom. The proposed legislation aims to close these perceived regulatory gaps.
