Prediction market activity has surged as traders flock to contracts tied to the escalating US-Iran conflict, while Washington moves toward clearer federal rules and a potential ban on event contracts related to war, terrorism, and death.
Notional trading volume on platforms like Polymarket and Kalshi reached all-time highs during the week ending March 9, with Polymarket hitting $2.49 billion and Kalshi at $2.85 billion, according to data from Token Terminal. The total notional volume across all prediction markets has now climbed to $145 billion, involving 2.8 million unique users, as per Dune Analytics.
Regulatory Scrutiny Intensifies
The growing activity in these markets has not gone unnoticed by US regulators. The US Commodity Futures Trading Commission (CFTC) has issued a staff advisory classifying event contracts on prediction markets as a ‘financial asset class.’ The regulator also submitted an Advanced Notice of Proposed Rulemaking, seeking public comment on how the Commodity Exchange Act (CEA) would apply to prediction markets.
This move comes after CFTC chair Michael Selig reiterated the commission’s ‘exclusive jurisdiction’ over prediction markets. However, a recent ruling by an Ohio judge pushed back against this claim, stating that Kalshi had failed to show the CEA would preempt Ohio’s sports gambling laws or that these contracts would fall under the CFTC’s exclusive jurisdiction.
Legislative Push to Ban War-Related Contracts
US Democratic Senator Adam Schiff has introduced new legislation, the DEATH BETS Act, which seeks to ban federally-regulated prediction markets from listing contracts tied to war, terrorism, assassination, and individual deaths. The act aims to amend the CEA to include a ban on similar contracts for entities overseen by the CFTC.
The proposal follows renewed insider trading allegations, with six Polymarket traders netting $1 million by accurately betting on the US strike against Iran. In February, Israeli authorities arrested and indicted two individuals suspected of using secret information about Israel’s strike on Iran for insider trading on Polymarket.
Market Dynamics and Platform Regulation
Since the beginning of the recent US and Israeli military conflict with Iran, prediction market activity has surged. Politics-related contracts have become the third-largest category on Polymarket, with a notional trading volume of $598 million, and the eighth-largest on Kalshi with $16 million, based on last week’s data from Dune.
Polymarket US, headquartered in New York and regulated by the CFTC as a Designated Contract Market (DCM), has been operating since late 2025 after acquiring CFTC-licensed QCX LLC for $112 million. Kalshi, also a New York-based DCM, continues to navigate the regulatory landscape amid the growing scrutiny.
Forward-Looking Insights
The surge in prediction market activity tied to geopolitical events underscores the growing role of these platforms in financial and political forecasting. However, the regulatory and legislative push to ban certain types of contracts highlights the ethical and legal challenges these markets face. As the conflict between the US and Iran continues, the scrutiny on prediction markets is likely to intensify, potentially reshaping the landscape of these innovative financial tools.
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