Prediction Markets Boom on Iran Bets as Congress Eyes Ban

Prediction markets are having a moment — and a crisis simultaneously. Volume on Polymarket and Kalshi hit all-time highs in early March 2026 as contracts tied to the US-Iran conflict drew a flood of capital, even as Washington moved to build the regulatory framework that could reshape the entire sector.

Record Volume Tied to Iran War Contracts

The numbers don't lie. During the week ending Monday, March 9, notional volume on Kalshi reached $2.85 billion and on Polymarket hit $2.49 billion — both all-time records, per Token Terminal data. Total notional volume across all prediction markets has now hit $145 billion through 2.8 million unique users, according to Dune analytics.

Politics-related contracts became the third-largest category on Polymarket at $598 million in weekly notional volume, and eighth on Kalshi at $16 million. These platforms have effectively turned geopolitical risk into a liquid, tradeable asset — which is exactly what has Washington worried.

The CFTC prediction markets rulemaking process is now formally open. The regulator issued a staff advisory classifying event contracts as a "financial asset class" and submitted an Advanced Notice of Proposed Rulemaking on how the Commodity Exchange Act applies to prediction markets. CFTC chair Michael Selig had publicly claimed the agency held "exclusive jurisdiction" over these platforms — a position an Ohio judge quickly questioned, ruling that Kalshi failed to show the CEA would preempt state gambling laws.

What Is the DEATH BETS Act — and Who Does It Target?

The DEATH BETS Act is legislation introduced Tuesday by Democratic Senator Adam Schiff that would amend the Commodity Exchange Act to bar CFTC-regulated platforms from listing contracts tied to war, terrorism, assassination, and individual deaths. Kalshi and Polymarket US fall directly in scope.

The timing wasn't random. Six Polymarket traders reportedly netted $1 million accurately betting on the US strike against Iran — immediately raising questions about whether those positions were informed by non-public intelligence. In February, Israeli authorities arrested two people suspected of using classified information about Israel's strike on Iran to trade on Polymarket.

Call it what you want. But when the most valuable information on a prediction market is a state secret, you don't just have a market integrity problem — you have a national security one.

How Polymarket Went From a $1.4M Fine to a Federal License

In January 2022, the CFTC charged Polymarket's parent company Blockratize with illegally offering unregistered event-based options contracts. The settlement: $1.4 million in civil monetary penalties and a shutdown of unlicensed operations.

By late 2025, Polymarket acquired CFTC-licensed QCX LLC for $112 million, rebranded it Polymarket US, and began operating as a Designated Contract Market. In November 2025, the CFTC issued an Amended Order of Designation for Polymarket US, vacating all prior restrictions. Kalshi — also a CFTC-regulated DCM headquartered in New York — is on a parallel trajectory, though a Nevada court recently forced a trading halt on sports contracts there.

The CFTC had exclusive jurisdiction over prediction markets.

Does This Regulatory Push Actually Threaten the Sector?

Probably not immediately. The DEATH BETS Act still has to clear Congress, and prediction market operators have already shown they can navigate regulatory pressure — three years from a federal fine to a full DCM license is a useful precedent.

The harder problem is structural. Prediction markets work because they aggregate information from people who know things. When the most valuable information is classified defense intelligence, no rulemaking comment period will fix it. That fight looks a lot less like a market regulation issue and a lot more like a counterintelligence problem.