Iran war prediction market bets draw heat: 'Insane this is legal'

U.S. Sen. Chris Murphy (D–Conn.) speaks next to his guest Fereshteh Ganjavi, an Afghan refugee and founder of Elena’s Light, during the “People’s State of the Union” event ahead President Trump’s State of the Union address in Washington, D.C., U.S., Feb. 24, 2026.

Elizabeth Frantz | Reuters

Prediction markets are facing renewed scrutiny from federal lawmakers after wagers about the fate of Iranian leader Ayatollah Ali Khamenei who was killed in the Saturday bombardment of Iran.

“It’s insane this is legal,” said Sen. Chris Murphy, D-Conn., in a post to X, referring to another post highlighting people who had made money on the invasion. “People around Trump are profiting off war and death. I’m introducing legislation ASAP to ban this.”

CNBC has reached out to Murphy’s office for more details on his proposal.

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It comes as a new trade group led by President Donald Trump’s former acting Chief of Staff Mick Mulvaney, Gambling Is Not Investing, launched to push tighter guardrails on prediction markets.

Other lawmakers, too, have expressed concern about prediction markets after the invasion. Rep. Mike Levin, D-Calif., said on X that “[p]rediction markets cannot be a vehicle for profiting off advance knowledge of military action.”

“We need answers, transparency, and oversight,” Levin said.

The new trade group Gambling Is Not Investing takes aim at another key market in the prediction space, markets on sports.

Many states in recent years have labored to pass sports betting laws, tapping massive tax revenues from wagers to balance their budgets. Some states now argue that prediction markets, which are federally regulated by the Commodity Futures Trading Commission and often offer betting lines on outcomes in sporting events, are encroaching on their regulated sportsbooks.

“Gambling products – regardless of what you call them – must follow established state and tribal laws,” Mulvaney said. “Rebranding sports wagering as ‘trading’ or ‘investing’ or ‘predicting’ misleads consumers, undermines responsible gaming protections, and weakens the state and tribal systems built to protect the public and fund vital community services.”

Kalshi, in a comment to CNBC, said it “doesn’t allow markets directly tied to death,” regarding betting lines over whether Khamenei would be out of power that have received criticism. The company issued refunds on the market, citing regulations barring wagers on death.

“We included every precaution on this market to make sure people could not trade on the outcome of death,” the company said. “Our rules were clear from the beginning, we never changed them, and we settled based on the rules. We reimbursed all fees and net losses because we thought the UX could have been clearer for users.”

Kalshi CEO Tarek Mansour also responded to Murphy directly in a separate post, saying “regulated prediction markets are not allowed to do war markets.”

“The market you’re posting is unregulated and offshore,” Mansour said.

NPR reported that on Polymarket, another prediction market that is not yet operational in the U.S., a user under the name “Magamyman” cashed in for $553,000.

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.