A user trading as “Magamyman” reportedly netted more than $553,000 on Polymarket by wagering that Iran’s Supreme Leader, Ayatollah Ali Khamenei, would be out of power—bets placed just before an Israeli strike that reportedly killed him on Saturday. The trades intensified scrutiny of prediction markets and renewed concerns that such platforms could allow people with access to privileged or classified information to profit from violent or geopolitical events.
Policymakers and critics reacted strongly. Sen. Chris Murphy (D-Conn.) called the situation “insane” and said people close to former President Trump were profiting from war and death, vowing to move quickly to try to ban this kind of trading. The White House denied that anyone in the president’s circle was responsible for the lucrative wagers.
Still, there are ties between the Trump family and Polymarket: Donald Trump Jr. serves as an adviser to the company, and his 1789 Capital has invested millions in the exchange. Reports say two federal investigations into Polymarket that began under the Biden administration were closed after the Trump administration took office.
Polymarket and similar exchanges have become venues for large sums betting on the timing and outcomes of military and political events. On Polymarket alone, roughly half a billion dollars reportedly changed hands on markets tied to when U.S. forces might strike Iran. Much of the volume tied to Khamenei’s ouster occurred on an overseas Polymarket-hosted exchange, which places it largely beyond the reach of U.S. regulators. Polymarket has received approval to open a U.S.-based platform but has not fully launched it; many American users access the site via virtual private networks that obscure their location.
Prediction markets have surged in popularity and are generally treated by regulators like the Commodity Futures Trading Commission (CFTC) as trading in futures contracts rather than conventional gambling. But U.S. commodity law bars contracts that would let traders profit from death, assassination or other violent outcomes—because those contracts would create financial incentives tied directly to human harm.
That legal boundary was on display over the weekend in how another major exchange, Kalshi, handled its Khamenei market. Kalshi’s market, which attracted more than $54 million in bets about when Khamenei would be out of power, was paused after news of the leader’s death. Traders who expected payouts did not receive them immediately; Kalshi said it would conduct a review and later announced it would refund fees and issue partial refunds based on the last traded price before confirmation of death.
Kalshi’s CEO, Tarek Mansour, explained that the company does not list markets that pay out directly on death and designs rules to prevent people from profiting from fatalities. The company said its refunds and pricing adjustments were intended to comply with U.S. laws that prohibit markets that effectively reward death or assassination.
The decision angered many traders, who accused Kalshi of reversing a correct prediction and likened the move to being “rugged,” a slang term for an exchange suddenly seizing funds or changing terms. Some users said the platform’s heavy promotion of the market made the refund move feel deceptive; others called the handling evidence that centralized prediction markets will prioritize regulatory compliance over traders’ expectations.
Observers pointed to earlier episodes that raised similar alarms: an anonymous trader reportedly won hundreds of thousands in suspiciously timed bets ahead of the arrest of Venezuelan President Nicolás Maduro earlier this year, and Israeli authorities charged two people last year for allegedly using classified information to place Polymarket bets tied to attacks on Iran during a 12-day conflict.
Advocates for reform argue Congress should act to close gaps that let markets monetize forecasts tied to war, assassination or other violent outcomes. Amanda Fischer, formerly with the Securities and Exchange Commission and now at the financial reform group Better Markets, said lawmakers need to stop “perverse incentives” created when people can bet on death and destruction. Critics say the confusion around resolution rules and the uneven jurisdictional reach of exchanges underscore the need for clearer regulation.
The episode involving “Magamyman” has intensified that debate: supporters of prediction markets argue they can reveal information and aggregate forecasts, while detractors warn that markets that allow trading on violent events create moral hazards and could be exploited by insiders. Regulators, platforms and lawmakers now face renewed pressure to define where commerce in political and military outcomes crosses ethical and legal lines.