Suspicious War Bets Raise Insider Trading Concerns in Online Markets
The proliferation of online prediction markets such as Polymarket and Kalshi has enabled wagers on virtually any major news event, including the ongoing Iran war. This expansion has created unprecedented opportunities for traders but has also raised serious concerns about potential insider trading and market manipulation.
Perfectly Timed Bets Generate Massive Windfalls
On February 27, just before US-Israel airstrikes against Iran, approximately 150 accounts on Polymarket placed bets totaling $855,000 predicting the strikes would occur the following day. Sixteen of these accounts each pocketed over $100,000 from their accurate predictions.
Shortly afterward, a single anonymous user under the account name "Magamyman" made more than $553,000 after betting that Ayatollah Ali Khamenei would be removed from power moments before his assassination by Israeli forces. According to a complaint filed to the Commodity Futures Trading Commission by consumer advocacy group Public Citizen, a crypto-analytics firm identified six suspected insiders who collectively made $1.2 million on Polymarket following Khamenei's death.
The pattern continued on April 7, when at least 50 Polymarket accounts placed bets that the US and Iran would reach a ceasefire hours before Donald Trump announced it on Truth Social. Earlier that day, Trump had warned that "a whole civilization will die tonight" if Iran did not open the Strait of Hormuz.
Commodity Markets Show Similar Suspicious Activity
Traders weren't only active on prediction markets. Similar surges occurred in oil futures trading just before major conflict announcements that would affect oil prices.
On March 23, traders placed $580 million in bets on oil futures just 15 minutes before Trump announced on social media that the US was having "productive" talks with Iran, according to the Financial Times. These traders made significant profits when Trump's comments triggered a sell-off that caused oil prices to plummet.
The same phenomenon occurred again on April 7, when traders spent $950 million on oil futures betting that oil prices would fall just hours before the ceasefire with Iran was announced.
"We can't say from the outset whether any of these trades were illegal. Any one of them could be lucky, and any one of them could be based on lawful information," said Andrew Verstein, a law professor at the University of California at Los Angeles. "But many of them bear the hallmarks of suspicious trades that would naturally warrant investigation."
Regulatory Challenges in a 'Wild West' Environment
For those monitoring trading patterns, the timing and volume of these bets suggest more than mere luck. "Not only the timing, but the amount of these bets makes it look very likely that someone had insider knowledge ... and placed very, very substantial bets on it," said Craig Holman, a government affairs lobbyist for Public Citizen.
Holman expressed skepticism about how aggressively the CFTC will pursue investigations given its current structure under the Trump administration. The commission typically has five bipartisan members appointed by the president, but currently has only one commissioner: Michael Selig, appointed by Trump in late 2025, who has positioned himself as friendly toward prediction markets.
"It's a wild west phase, when we're talking about the prediction market industry, and now it's spilled over into the stock market as well," Holman added.
Anonymous sources told Reuters and Bloomberg that the CFTC launched an investigation into the oil futures trades placed on March 27 and April 7, though the agency has not publicly confirmed this investigation.
Legal Gray Areas Complicate Enforcement
Federal law prohibits government employees from using non-public information for personal profit. In late March, a bipartisan group of representatives introduced legislation that would ban members of Congress and senior federal staff from participating in prediction market contracts related to political events or policy decisions.
However, experts warn that insider trading law is complex, particularly regarding new technologies that facilitate online betting while creating complicated paper trails. "The trick is that there are essentially no clean cases of people getting in trouble for commodity futures insider trading," Verstein explained. "The law there is just not well developed."
In a recent paper, Columbia law professor Joshua Mitts and other researchers screened more than 200,000 suspicious wallet-market pairs between February 2024 and February 2026. They found that traders in this group achieved a nearly 70% win rate, making $143 million in well-timed bets tied to events ranging from the capture of former Venezuelan leader Nicolás Maduro to Taylor Swift's engagement to Travis Kelce.
"The challenge here is that this trading is occurring through the blockchain or other anonymized means, so it is going to be quite difficult for a regulator enforcement authority or prosecutor to determine the identity of the trader," Mitts said. "They would also have to prove the trader traded on the basis of information that had been wrongly misappropriated."
Broader Implications for Markets and Governance
The stakes extend beyond financial markets. Insider trading involving classified military information can erode trust in both markets and governments. "Unlike corporate insider trading, there's a lot of ways for the government to make itself be correct. You can just make the war that would occur, and that's concerning because then the real economy is being distorted," Verstein warned. "Real decisions, including perhaps financial decisions, are being distorted by financial bets."
Speaking to Congress recently, CFTC commissioner Selig stated that the agency is prepared to pursue those suspected of insider trading, warning "we will find you and you will face the full force of the law." However, he noted that the commission would not issue new regulations until it has five seated commissioners.
Polymarket did not respond to requests for comment. In a statement, White House spokesperson Davis Ingle emphasized that "federal employees are subject to government ethics guidelines that prohibit the use of nonpublic information for financial benefit" and that "the CFTC will always uphold its duty to monitor fraud, manipulation and illicit activity daily."
