Polymarket users stand to make millions if the US sends ground troops to Iran. It reveals a dark truth about prediction markets

One account alone turned roughly $61,000 into more than $493,000 in profit (4), according to CoinDesk. A separate account trading under the name "Magamyman" earned more than $553,000 betting on the death of Iran's Supreme Leader Ali Khamenei (5) shortly before an Israeli strike killed him, according to NPR.

Then there's the trader CNN identified (6), with the help of Bubblemaps, who won 93% of their five-figure wagers on Iran since 2024, netting nearly $967,000 — even though the events they predicted were unannounced military operations. Todd Phillips, a finance professor at Georgia State University and former Commodity Futures Trading Commission (CFTC) advisory board member, told CNN the win rate was a red flag, adding most high-frequency traders hover just above 50%.

What's actually going on here

Prediction markets work like stock markets, except what you're buying and selling are contracts tied to real-world events rather than company earnings. You purchase "yes" or "no" shares at a price that reflects the crowd's estimated probability. If you're right, each share pays out $1. If you're wrong, you lose your stake.

The model has legitimate applications. Proponents argue these markets aggregate dispersed information more effectively than polls or pundits can. But when the event being traded on is a military operation — planned in secret and executed without public warning — the pool of people who could reasonably "predict" it narrows considerably.

That's the core tension now gripping Washington. Bubblemaps CEO Nicolas Vaiman told Newsweek (7) that in military situations, planning involves officials, advisers, officers and sometimes multiple countries, meaning the number of people who might know something in advance can be large. Combine that with anonymous access to a market that lets you bet directly on a specific event, he said, and the temptation is obvious.

The regulatory scramble

The backlash has been swift. On March 31, the CFTC's new enforcement director, David Miller, declared at New York University School of Law (8) that insider trading in prediction markets is now a top enforcement priority, and that the belief that such laws don't apply to these platforms is flat wrong.

On Capitol Hill, lawmakers have introduced a flurry of bills.

Sen. Adam Schiff's DEATH BETS Act (9) would ban any CFTC-registered exchange from listing contracts tied to war, terrorism, assassination or death. A separate bipartisan measure, the PREDICT Act (10), targets the misuse of classified information on prediction platforms. And Sens. Jeff Merkley and Elizabeth Warren, along with Rep. Jamie Raskin, introduced the STOP Corrupt Bets Act (11), which would ban prediction market bets on elections, sports, war and government actions entirely.