Prediction market activity surged to record levels as traders piled into Iran-related contracts, even as US lawmakers and regulators moved to tighten oversight of the fast-growing sector.
Notional trading volume hit new highs on Polymarket and Kalshi, reaching $2.49 billion and $2.85 billion respectively in the week to March 9, pushing total market volume to $145 billion across 2.8 million users.
The spike in activity coincided with heightened geopolitical tensions and controversial war-linked bets, which have drawn scrutiny from regulators and lawmakers concerned about ethics and market integrity.
The US Commodity Futures Trading Commission has begun seeking public feedback on how prediction markets should be governed, asserting its role as the primary regulator while exploring how existing law applies to event-based contracts.
At the same time, Democratic Senator Adam Schiff introduced legislation aimed at banning contracts tied to war, terrorism, assassination and death, following reports that some traders profited heavily from accurately predicting military strikes on Iran.
The regulatory push follows mounting concerns over insider trading, after several accounts reportedly generated more than $1 million in profits by placing well-timed bets ahead of US military action.
Prediction markets such as Polymarket and Kalshi have grown rapidly in recent years, positioning themselves as financial exchanges regulated by the CFTC, though critics argue they increasingly resemble gambling platforms and raise risks around misinformation, ethics and the use of non-public information.