Somewhere between the first explosions over Tehran and President Donald Trump's video announcement of what his Department of War called "Operation Epic Fury," a handful of anonymous crypto wallets were quietly counting their winnings. While missiles flew and civilian casualties mounted on 28 February, the prediction platform Polymarket had become, in the words of one analyst, a real-money intelligence market for geopolitical risk.
The numbers are staggering. The "US strikes Iran by...?" contract, live since 22 December 2025, pulled $529 million in total volume, making it one of the largest single markets Polymarket has ever hosted. That figure makes it the largest market in Polymarket's "World" and "Geopolitics" categories by a wide margin, and the fourth-largest in the broader "Politics" category, behind only Trump-related contracts from the 2024 election cycle. In plain English, this means more money was wagered on the timing of a military attack on a sovereign nation than on almost anything else in the platform's history.
But the sheer volume is almost beside the point. The detail that has set off alarm bells is far more pointed. Onchain analytics firm Bubblemaps identified six wallets that collectively netted $1.2 million in profit by betting on a US strike on Iran by 28 February, the exact day the strikes occurred. Most of the wallets were funded within 24 hours of the attack, bet specifically on the February 28 contract rather than broader timeframes, and purchased "yes" shares hours before the military operation began. The largest single wallet turned roughly $61,000 into over $493,000 in profit.
Bubblemaps CEO Nicolas Vaiman acknowledged the limits of the evidence, telling The Block: "It's almost impossible to be 100% certain in these cases, but given the size of the bets, the freshly funded wallets, and the timing around the bets, it felt convincing enough for us to share." No government agency has publicly named any suspect, and no formal investigation into these specific wallets has been announced. All allegations, for now, remain allegations.
This is not the first time Polymarket's geopolitical markets have attracted this kind of scrutiny. Earlier in February, Israeli prosecutors filed indictments against an Israel Defence Forces reservist and a civilian for allegedly using classified military intelligence to bet on Polymarket. The pair reportedly wagered on the timing of Israel's strike on Iran during the June 2025 Twelve-Day War, earning over $150,000 in combined profits. They face charges of severe security offences, bribery, and obstruction of justice, marking the first known criminal prosecution arising from alleged prediction market insider trading linked to a classified military operation.
There is a pattern forming that the industry can no longer dismiss as coincidence. In January, a freshly created account wagered roughly $32,000 on the ouster of Venezuelan President Nicolás Maduro, purchasing shares at around 7 cents before the US military operation was publicly announced. That trade yielded more than $400,000 in profit within 24 hours, prompting Representative Ritchie Torres to introduce the Public Integrity in Financial Prediction Markets Act of 2026, which would bar federal officials from trading prediction market contracts tied to government policy.
Polymarket's response to the Iran controversy has been, at best, tone-deaf. The platform added a note to its Middle East markets stating that "the promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society," and went on to claim that after speaking with people directly affected by the attacks, it found that prediction markets "could give them the answers they needed in ways TV news and X could not." Polymarket CEO Shayne Coplan has previously defended the presence of informed traders, telling CBS News that insiders "having an edge on the market is a good thing" because it accelerates price discovery. It is a defence that may hold water in a market for election outcomes. It holds rather less water when the informed traders appear to possess classified military intelligence.
Kalshi's Contrasting Crisis
The broader sector was not spared its own embarrassment. Rival platform Kalshi, which operates as a regulated US exchange under Commodity Futures Trading Commission oversight, ran a contract titled "Ali Khamenei out as Supreme Leader?" that drew around $50 million in total volume. While reports of Khamenei's death circulated Saturday morning, Kalshi posted on X: "BREAKING: The odds Ali Khamenei is out as Supreme Leader have surged to 68%." The market had been live since 9 January and accumulated more than $50 million in total volume, with roughly $20 million trading on Saturday alone.
Kalshi ultimately settled the "Khamenei out" market at the last price traded before the first strike and fully refunded any positions opened after that moment, with co-founder Tarek Mansour saying no user would lose money on the market. Rival platform Polymarket took a different approach, settling its equivalent contract at 100% after confirmation. That contract drew $45 million in volume and was one of the most-traded geopolitical markets in the platform's history. The top trader made approximately $757,000 on a yes position.
Amanda Fischer, a former SEC chief of staff now at Better Markets, described Kalshi's conduct as "more or less offering a proxy market on assassination." The criticism may be a little harsh, given that Kalshi ultimately protected its users from profiting on a death-linked resolution. But the episode exposed just how thin the line is between a legitimate forecasting tool and a mechanism that creates financial incentives around lethal events.
The Regulatory Gap Is Now a Chasm
For anyone who believes in free markets and sound institutional oversight, the situation presents a genuine dilemma. Prediction markets do produce real information. Kalshi's last traded price on the Khamenei contract before the strikes was around 2%, and Polymarket was trading at 1% on Friday night before money started coming in just before the strikes. In other words, the crowd got it wrong right up until insiders apparently got it right. That is not wisdom-of-the-crowd forecasting; that is the monetisation of classified intelligence.
Polymarket operates offshore and serves US users through VPNs, skirting CFTC regulations that restrict prediction markets on certain event types. The platform has grown rapidly because it is outside regulatory reach. Joseph Grundfest, a former Securities and Exchange commissioner now a law professor at Stanford University, put it bluntly: "If someone is doing something they know they shouldn't be doing, they're much more likely to be doing that on Polymarket than Kalshi. The problem is we have a wide array of markets that are illegal, immoral and problematic that are facilitated by those trading with anonymous crypto. Now prediction markets like Polymarket are the latest manifestation of this problem."
In late February, six Democratic senators asked the Commodity Futures Trading Commission to take action against contracts that "incentivize physical injury or death," citing several Polymarket contracts. Senator Chris Murphy said on X that he would introduce legislation "ASAP" to prevent "people around Trump" from "profiting off war." The political framing may be partisan, but the underlying concern is not.
There are genuine defenders of the prediction market model, and their arguments deserve to be heard rather than dismissed. What Polymarket is doing is something traditional markets structurally, and legally, cannot. Equity and oil futures do not reopen until Sunday evening, but on Polymarket, anyone with a crypto wallet can take a position on Iranian regime change on a weekend and see real-time pricing from thousands of other participants doing the same thing. The speed and accessibility of that information flow does have genuine social value, particularly for businesses and individuals with exposure to geopolitical risk. The honest answer is that nobody knows with certainty whether the forecasting function outweighs the moral hazard.
What is harder to defend is the regulatory vacuum. The Australian Securities and Investments Commission has so far had little cause to engage with these platforms directly, given their offshore structure. But as prediction markets grow, and as Australian retail investors encounter them through social media and crypto channels, the question of consumer protection becomes harder to defer. A platform that pays out $757,000 to the top bettor on a world leader's death, while welcoming anonymous accounts that appear to have had advance knowledge of classified military operations, is not merely a curiosity. It is a potential conduit for the weaponisation of state secrets for private profit.
Reasonable people can disagree about how much weight to give the forecasting benefits of prediction markets versus the risks of perverse incentives and insider exploitation. What is not reasonable is the current arrangement: offshore, anonymous, largely unregulated, and openly inviting anyone with a crypto wallet to bet on the timing of the next bomb drop. The market got one thing right this weekend, even if the crowd got it wrong. Information asymmetry, in the end, is just another word for an unfair advantage.