If you’re still on the fence about whether prediction markets (Kalshi, Polymarket, etc.) are good for the nation, consider this:
In the weeks leading up to the attack on Iran on Feb. 28, Kalshi offered short-term wagers on whether Ayatollah Ali Khamenei would be “out as Supreme Leader.” Company officials said they do not allow bets on wars or assassinations. The question about Khamenei being in or out of office didn’t refer directly to war or death, even though both figured heavily in what eventually happened. Get the difference?
In an email, Elisabeth Diana, head of communications at Kalshi, told me, “We ... don’t list markets directly tied to death.”
Polymarket, which is offshore and, unlike Kalshi, not regulated, offered a similar proposition, along with a choice of the date by which an attack on Iran would occur. Those choices included Feb. 28 as an option, which turned out to be the day of the attack.
A battle with Utah
To refresh your memory, prediction markets currently are in a battle with Utah’s political leaders. Kalshi is regulated by the federal Commodity Futures Trading Commission. Because of this, it claims to be beyond the reach of any state anti-gambling law. That has recently drawn the ire of Utah officials, including Gov. Spencer Cox and Sen. Mike Lee.
Kalshi has since sued Utah over its attempts to enforce state laws.
Prediction markets like to argue they take the temperature of large, random swaths of people, making their predictions on things such as elections highly accurate. But when it comes to the date of an attack or the targeting of a foreign leader, the general public is reduced to “a cackle of hyenas,” to quote Ana Marie Cox, writing for the New Republic.
The only people who know such sensitive information for sure have inside knowledge. When it comes to military attacks, that could be anyone from the top of the government to a soldier who has just received orders.
Suspicious wagers
In the wake of Saturday’s attack, a crypto-analytics firm called Bubblemaps flagged six people who made $1.2 million through accurate wagers on Polymarket. The Wall Street Journal reported that one user placed $26,000 on predictions of an attack on Feb. 28 and won more than $200,000.
Kalshi has not been under any similar cloud. “Unlike our competitor, we ban and enforce insider trading,” Diana told me.
Sen. Chris Murphy, D-Conn., called these legal wagers “insane” and said he was going to introduce a bill to stop them.
Cox, in the New Republic, called it “immediately reprehensible from a moral standpoint.” She skewered the idea that prediction markets used some sort of crowdsourcing to make the wagers on war. “Did they consult a medium or a Ouija board?” she asked.
I spoke by phone with Les Bernal, national director of the advocacy group Stop Predatory Gambling. He called it “treason.”
“The idea that any person associated with public life in this country would be profiting on bets about an attack of that scale … it goes against our values as a country, no matter what party you come from,” he said.
Bernal urged prison sentences for anyone found guilty of using insider information to profit from something in which the lives of American soldiers are at stake. Such information could tip enemies off to plans.
Bernal, whose organization opposes all government-sanctioned games of chance, said organized gambling has “corrupted the values of our political leadership of both political parties.”
“There was no grassroots movement by the American public to wager on military attacks,” he said. “If you think this country’s going to get back on track again, one of the issues it starts with is getting government out of the institution of predatory gambling.”
Diana said its operations are fairer and safer than sportsbooks and casinos because they make money from fees, not from people with losing bets. “There is no ‘house,’ meaning we don’t incentivize people to lose,” she said.
And yet, the lure of instant wealth remains.
Arrests in Israel
Insider trading is not exclusively an American problem. Earlier this month, news broke that Israeli officials arrested an army reservist and a civilian in connection with bets on military operations based on classified information given to reservists as a part of their jobs.
The temptation to get rich is not a new development. No one should be surprised by any of this.
Sens. Jeff Merkley, D-Ore., and Amy Klobuchar, D-Minn., introduced a bill on on Thursday that would prohibit the president, vice president and members of Congress from engaging in predictive markets for the outcome of current events. CNBC reported it also would bar such activity for senior executive branch officials, with fines starting at $10,000.
Diana told me Kalshi has engaged with Merkley over the content of the bill.
Meanwhile, Kalshi has another problem on its hands — figuring out the exact time when Khamenei died and excluding anyone who placed a bet after that moment. Did the leader die when the first reports came, or after it was confirmed by President Donald Trump?
The publication Gaming America said customers were pursuing a class-action lawsuit over this issue. Diana said, “Our rules were clear from the beginning. We never changed them, and we settled based on the rules. We reimbursed all fees and net losses because we thought the UX could have been clearer for users.”
Gaming America said the move was part of a policy “designed to avoid monetizing death-related outcomes.”
Good luck with that. It may be hard to avoid getting burned when you walk too close to the death market fire pit.