Prediction markets face insider trading claims after Khamenei killing

Users on two major prediction markets staked at least $255m on whether Iran’s supreme leader would be removed after US and Israeli strikes, according to Business Insider, and then spent the weekend arguing that the markets were either rigged or designed to reward whoever gets the news first.

The flashpoint was the reported killing of Ayatollah Ali Khamenei. On Polymarket, traders piled into multiple Iran-related contracts tied to US strikes, regime change and Khamenei’s fate. Kalshi, a US-regulated platform that does not list markets explicitly settling on death, briefly saw heavy trading in contracts on whether Khamenei would be “out” within a set timeframe before activity was halted, Business Insider reports.

The controversy was not only moral but mechanical. Kalshi told users that if Khamenei died, the relevant market would resolve based on the last traded price prior to “confirmed reporting of death” rather than a direct death settlement. On Polymarket, one contract asking whether the US would “forcibly remove” Khamenei by March 31 was later clarified to resolve “no” because the US had “merely contribute[d] to or assist[ed]” in his killing — wording that triggered calls for disputes.

Those fine-print distinctions matter because the underlying events are not transparent. Military strikes, intelligence assessments and leadership deaths unfold through classified channels and staged announcements. In that setting, “public information” is not a neutral clock; it is a sequence of leaks, official statements and media confirmations. A market can be perfectly honest and still function as a transfer mechanism from late-arriving retail traders to participants who either anticipate the bureaucracy’s timing or have access to privileged information.

Business Insider cites blockchain analytics firm Bubblemaps saying it identified several new wallets connected to Polymarket that collectively made more than $1.2m on strike-related bets, with the wallets funded shortly beforehand and buying “yes” positions hours before the strikes. The episode echoes a February case in Israel, where several people were reportedly arrested and at least two indicted over alleged use of military secrets to profit from Polymarket bets.

The platforms’ governance structures then become part of the trade. Polymarket’s resolution process is decentralized and can involve disputes, which means the payoff is not only about what happened, but about how an oracle interprets what happened. Kalshi’s tighter regulatory perimeter limits what it can list, but it still has to define what “out” means when a regime can conceal a death, deny it, or replace a leader behind closed doors.

In the same weekend’s political aftermath, US senators argued over whether the strikes amounted to a war of choice and what comes next in Iran, according to The Guardian. Prediction markets were running the same argument in miniature, except the prize was cash and the referee was contractual language.

By Sunday morning, Polymarket still had scores of Iran-related markets open with minimal liquidity. The loudest complaints were about the handful that did attract volume — the ones where a single classified decision could move the price faster than any public fact-checker could keep up.