Accurately betting on the death of Hassan Rouhani? The situation in Iran stirs up the prediction market, with a $500 million gambling event causing a seismic shift in legality.

Following the settlement of bets in the United States after the attack on Iran, the prediction market is facing a new round of scrutiny. These platforms had previously offered bets on the timing of the US military airstrikes and whether Iran's top leader Ali Khamenei would step down. Last weekend, Khamenei was killed in an airstrike in Israel. During the rumors of his death, the odds for related contracts fluctuated dramatically. Analysts noted a surge in bets on his stepping down before the attack occurred and in January, while critics began to question the legality of these markets. A total of $529 million was invested in a series of contracts related to the timing of the attack on the Polymarket platform, with users who bet on last Saturday as the first attack date receiving payouts. Another $150 million was invested in two controversial contracts related to whether Khamenei would lose his position as the supreme leader. Analytics company Bubblemaps stated on X platform that six accounts profited $1.2 million from bets made a few hours before the attack occurred last Saturday on Polymarket. Another analysis platform, Polysights, previously pointed out on X that in mid-January, a group of new wallets with little to no trading history began buying contracts related to Iran, focusing mainly on Polymarket's contract on Khamenei stepping down by the end of March. Polymarket did not immediately respond to requests for comment. Due to disputes over the outcome of the "Khamenei stepping down" contracts by token holders, the relevant contracts are currently in a "dispute period." Competitor Kalshi also had a market for "Khamenei stepping down." According to its CEO, the company eventually refunded traders and paid out based on the final trading price before Khamenei's death. "When the market involves potential outcomes like death, we design rules to prevent people from profiting from death. That's what we do," Kalshi CEO Tarik Mansour stated on X. Legal gray area Prediction markets offer tradable "yes/no" contracts, allowing users to bet on a wide range of real-world events from sports, politics, and economics. Contract prices fluctuate between 0 and 100 cents depending on order flow, and once the result is confirmed, $1 is typically paid to winning bettors. Under US law, betting against the public interest (potentially involving war or assassination) is prohibited. Last month, six Democratic senators wrote to the Commodity Futures Trading Commission expressing concerns about prediction markets possibly violating relevant rules. "It's crazy that this is legal...I will be introducing legislation to ban it as soon as possible," Connecticut Democratic Senator Chris Murphy responded on X to Bubblemaps' post about Polymarket betting. Murphy was not one of the six senators who signed the joint letter. The popularity of prediction markets has soared since the 2024 US election. It has been proven that they are more accurate in predicting Trump's victory than polling data in real-time. According to analysts at brokerage Clear Street, the global prediction market trading volume reached $47 billion last year. This betting frenzy has sparked backlash on the legal front and attracted the attention of Wall Street. The New York Stock Exchange's parent company ICE has acquired a $20 billion stake in Polymarket, while trading platform Plus500 launched a prediction market on its US retail end last month through a partnership with Kalshi. These platforms are also under scrutiny for insider trading issues and are growing in regulatory gray areas. Prediction markets argue that they should be regulated by the Commodity Futures Trading Commission, not state gambling regulatory bodies. In January, a mysterious trader profited about $410,000 for betting on the downfall of Venezuelan President Nicolas Maduro.