From Dubai: The regional dynamics at play are more complex than the headlines suggest. But one thing from the past 48 hours is strikingly simple: as US and Israeli strikes began tearing through Tehran in the early hours of Saturday, February 28, turning a tense diplomatic standoff into open war, gamblers on the Polymarket prediction platform were refreshing their screens, waiting for payouts.
The strikes, according to Al Jazeera, killed Iran's supreme leader Ayatollah Ali Khamenei and drew an unprecedented wave of retaliatory strikes across the Gulf, targeting US military assets in Bahrain, Qatar, Kuwait and the UAE. Iran's foreign ministry accused Washington and Tel Aviv of violating the UN Charter. The Omani foreign minister, who had served as mediator in nuclear negotiations still under way at the time of the attack, urged the US "not to get sucked in" further. Schools were hit. Civilian casualties are still being counted. And yet, as Kotaku reported, Polymarket's front page was swelling with bets on the timing of ceasefire deals and regime collapse.
The scale of the betting is staggering. According to CoinDesk, the long-running "US strikes Iran by...?" family of contracts on Polymarket has accumulated over $529 million in total trading volume since December 2025, making it one of the platform's largest markets ever. The February 28 date contract alone drew $89.6 million in trading. A separate market on Khamenei leaving power by March 31 attracted $45 million in volume and paid out after his death was confirmed. Within 24 hours of the strikes, Polymarket had launched an entire dedicated section for Iran-focused markets, with traders now wagering on ceasefire timelines, US ground invasion probabilities, and whether the Iranian regime would fall by June 30.
For Australia's energy sector, this signals a period of acute volatility. As NPR reports, the Strait of Hormuz, through which approximately 20 percent of global oil supplies transit each day, sits under direct threat of Iranian disruption. Analysts warn that a prolonged Hormuz crisis could push Brent crude well above $100 per barrel, with flow-on impacts for Australian petrol prices, freight costs, and inflation. The Reserve Bank of Australia, already navigating a delicate monetary policy path, would face renewed pressure if an energy shock hits before domestic demand has fully stabilised.
A Platform That Profits From Uncertainty
Polymarket's response to the controversy has been, to put it charitably, tone-deaf. The platform posted an editorial note above its Iran markets claiming, as reported by both Kotaku and CoinDesk, that prediction markets offer "the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society," and that after speaking with people directly affected by the attacks, the company found its markets "could give them the answers they needed in ways TV news and X could not." The people placing $89 million in bets on the specific date of a bombing campaign are, self-evidently, not the same people sheltering from missile strikes in Tehran. The claim strains credulity.
There is also the question of whose "wisdom" is actually being aggregated. According to market researcher LayerHub, as cited by Rest of World, 87 percent of Polymarket accounts incur losses. The platform's user base skews toward a specific demographic, cryptocurrency-adjacent, politically engaged, and overwhelmingly male. Treating the collective instincts of that cohort as an "unbiased" public forecast is a significant stretch, and a demonstrably wrong one in at least some cases. When Pierre Poilievre's odds were riding high on Polymarket ahead of the 2025 Canadian federal election, bettors suffered a painful reminder that financial conviction is not the same as informed prediction: Poilievre not only failed to win the election but lost his own parliamentary seat.
The Insider Trading Problem Is Not Theoretical
The more troubling issue is not uninformed bettors losing money on geopolitical long shots. It is the well-documented pattern of people with access to non-public information cashing in through anonymous crypto wallets. According to The Block, onchain analytics firm Bubblemaps flagged six Polymarket wallets that profited a combined $1.2 million by betting on US military strikes against Iran on February 28, with most accounts created and funded within 24 hours of the attack. One account purchased over 560,000 "yes" shares at roughly 10.8 cents each, collecting close to $560,000 after the contract resolved. All six profiles were created in February.
This is not an isolated incident. Israeli prosecutors indicted a military reservist and a civilian earlier this month for allegedly using classified Israel Defence Forces intelligence to place bets on Polymarket during the June 2025 Twelve-Day War, earning an estimated $150,000 in profits. NPR reported that the charges represent the first publicly known instance of arrests tied to a prediction market bet allegedly made using military secrets. The Polymarket CEO, Shayne Coplan, has previously argued to CBS News that insiders "having an edge on the market is a good thing" because it accelerates price discovery. The Israeli government appeared to take a different view.
Rival platform Kalshi, which holds formal registration with the US Commodity Futures Trading Commission, has taken a markedly different approach, suspending and fining users for insider trading and stating publicly that it prohibits the practice in all forms. Polymarket, by contrast, is not regulated in the United States and relies on crypto wallet anonymity that makes enforcement deeply problematic. A former US Securities and Exchange Commission official, now a law professor at Stanford University, told NPR that Polymarket's structure creates conditions where "we have a wide array of markets that are illegal, immoral and problematic."
The Harder Questions About Markets and War
The defenders of prediction markets are not without arguments worth taking seriously. There is a genuine academic tradition behind the idea that markets aggregate dispersed information efficiently, and Polymarket's pricing on the 2024 US presidential election did outperform major polling aggregators in swing states. The platform's structure, whatever its flaws, does create a financial incentive to be right rather than merely to perform certainty, which is more than can be said for much political commentary. A serious case can be made that, stripped of its most egregious applications, prediction market data carries some informational value.
The problem is that those theoretical benefits collapse under the weight of what is actually happening. When markets on military strikes can be monetised using classified state secrets, when anonymous wallets funded hours before a bombing campaign collect six-figure payouts, and when a platform responds to civilian casualties with a note about "the wisdom of the crowd," the argument that this is a public good becomes very difficult to sustain. The existing financial incentives around military conflict, from weapons manufacturing to resource access, already create moral hazards that democratic societies struggle to manage. Adding anonymous, lightly regulated wagering into that mix does not obviously improve outcomes for anyone except the winners.
For Australian policymakers, the Polymarket controversy is a preview of regulatory questions that are heading our way. Prediction markets are growing rapidly. Rest of World reports that geopolitical betting events on Polymarket increased 260 percent year-on-year in January 2026 alone. Australia's existing online gambling regulatory framework, administered by the Australian Communications and Media Authority, was not designed with anonymous crypto-based prediction markets in mind. The question of whether platforms like Polymarket constitute gambling under Australian law, and therefore fall within state and territory jurisdiction, has not been definitively settled.
Reasonable people can disagree about whether prediction markets, properly regulated and transparent, serve a legitimate informational function. They can disagree about where to draw the line between a futures contract and a bet. What is harder to defend is the specific combination of anonymity, minimal oversight, and military-grade insider information that has characterised Polymarket's most lucrative recent markets. The deaths accumulating in Tehran and across the broader region represent a tragedy of historic proportions. The least that Western regulators owe to that reality is a serious, evidence-based conversation about whether platforms that turn such tragedies into trading instruments should be allowed to operate with the current degree of impunity.