Hickenlooper, Reed Push to Ban Online Gambling on Military Operations

Demands come after several online prediction market users made millions in profit on bets surrounding Iran military operations

WASHINGTON - Today, U.S. Senators John Hickenlooper and Jack Reed sent a letter to Commodity Futures Trading Commission (CFTC) Chair Michael Selig calling on the CFTC to prohibit gambling contracts on events tied to U.S. military operations. The letter follows reporting that users on Polymarket profited off the timing of U.S. strikes in Iran and the death of Iranian Ayatollah, Ali Khamenei.

"To address dangerous national security, market integrity, and immoral outcomes, the CFTC must enforce the law and immediately halt trading in event contracts tied to U.S. military operations. Given the high potential for insider trading and evidence that insider trading did in fact occur in the "Iran strike" contract on Polymarket, we urge the CFTC to investigate this matter on platforms that the agency regulates and ultimately bring big cases to punish significant wrongdoers," the senators wrote. "These contracts are so dangerous to the national security of the United States and so offensive to U.S. values that they far outweigh any legitimate risk-management purpose."

Online prediction market platforms like Kalshi and Polymarket function like online casinos, allowing users to wager directly on real events such as sports, elections, corporate earnings, economic data, award shows, and more in a user-friendly setting under the guise of financial trading language.

The CFTC regulates prediction markets in the U.S., and under current law, regulated prediction markets in the U.S. cannot allow users to place bets on wars or assassinations. While Polymarket is headquartered in the United States, its current operations are exclusively overseas and its platform is purportedly not open to U.S. users. By contrast, Kalshi is a CFTC-regulated prediction market available to U.S. retail investors but has exploited loopholes to allow users to place bets. Both platforms have hired Donald Trump Jr. as a formal advisor and his venture capital firm has made multi-million dollar investments in Polymarket.

In the past year, there have been multiple instances of suspicious betting activity on military operations. For instance, ahead of the July 2025 day war between Israel and Iran, an anonymous Polymarket user correctly predicted the timeline for that 12-day war and profited more than $150,000 before going dormant for six months. That account became active again just before last weekend's U.S.-Israeli strikes on Iran.

Hickenlooper previously sent a letter to the Trump admin demanding their plan to combat manipulation and fraud in prediction markets. This letter followed reports that just hours before the U.S. raid that resulted in the capture of Venezuelan President Nicolás Maduro, a newly created Polymarket account wagered over $30,000 that Maduro would be out of office by the end of the month - netting more than $400,000 in profit.

Full text of the letter HERE and below:

Dear Chairman Selig:

We write to urge the Commodity Futures Trading Commission to prohibit event contracts tied to U.S. military operations and investigate whether any insider trading has occurred in connection with recent military strikes against Iran.

Event contracts are derivatives that provide anyone with the chance to wager on whether something will occur. Under the Dodd-Frank Act and the CFTC's rules, event contracts that "involve, relate to, or reference assassination or war" are prohibited. This category includes event contracts that predict whether a U.S. adversary will no longer be in office, such as Ayatollah Khameini in Iran, Nicolas Maduro in Venezuela, or Miguel Diaz-Canel in Cuba. Because these leaders are so entrenched and protected by vast military forces, their continued leadership is perceived to be completely insulated from removal except by armed intervention. As a result, event contracts referencing their ouster "involve or relate to" war.

These contracts are so dangerous to the national security of the United States and so offensive to U.S. values that they far outweigh any legitimate risk-management purpose. Traders with inside information that specific geopolitical events will occur or who can directly influence such events can easily buy event contracts. Given the high potential for insider trading, a surge in buying activity and a rapid price increase can signal that the reference event will occur. Such a pattern could tip off our adversaries that U.S. intervention is imminent. By contrast, speculation in traditional financial instruments that may be linked to geopolitical instability, such as oil, gold, and currencies, do not send direct and specific signals that an attack in one specific country is imminent. And the ability to trade event contracts tied to violent geopolitical events could create financial incentives for someone to actually commit violence for profit.

Activity in prediction markets regarding the war with Iran that began on February 28 demonstrates how event contracts tied to U.S. military operations are morally repugnant and provide no social benefit. On offshore platform Polymarket, which is not regulated by the CFTC, at least six wallets made more than $1 million in profits in just hours by betting that the U.S. or Israel would strike Iran by that date. According to reporting by Bloomberg, this activity is the "hallmark" of insider trading. An investigation is already underway by Israeli authorities. On CFTC-regulated platform Kalshi, traders bet whether Ayatollah Khameini would be "out as Supreme Leader" by that date. Kalshi was still promoting the Khameini market as its "featured market" throughout the day of military strikes, encouraging speculation on war or death. After Khameini died, the platform "clarified" that payouts under the contract would be limited and announced that some trading fees would be refunded. Despite these efforts, many traders still apparently profited from price appreciation after the strikes had started but before Khameini's death was confirmed. The contract resolved when Khameini died, providing strong evidence that this is a death market and that traders profited directly from speculation on war.

Insiders face little risk of penalty under the CFTC's current enforcement program. The insider trading laws for commodities markets are underdeveloped compared to analogous laws in securities markets. To date, the CFTC has not brought a single enforcement case involving prediction markets. All the CFTC has done is issue a press release highlighting two minor infractions that were addressed internally under Kalshi's own terms and conditions, one involving $246.36 in illicit profits and another involving $5,397.58. That signals a lax oversight regime and will not deter insider trading.

To address dangerous national security, market integrity, and immoral outcomes, the CFTC must enforce the law and immediately halt trading in event contracts tied to U.S. military operations. Given the high potential for insider trading and evidence that insider trading did in fact occur in the "Iran strike" contract on Polymarket, we urge the CFTC to investigate this matter on platforms that the agency regulates and ultimately bring big cases to punish significant wrongdoers.

We would appreciate your immediate action on this important matter and look forward to your prompt reply.

Sincerely,

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