Even as prediction-market platforms have tested legal and regulatory norms like never before, most have drawn a line at one category: direct wagers on war.
Not Polymarket.
In recent weeks, the startup — newly backed by Intercontinental Exchange Inc., the parent company of the New York Stock Exchange — has listed a growing roster of contracts related to active military conflicts, including the possibility of China invading Taiwan and Russia capturing various cities in Ukraine. One market, tied to US strikes on Iran, has generated more than $18 million in trading.
This week, a group of 12 Democratic senators raised alarms about platforms facilitating bets on war, arguing that federal law expressly prohibits such contracts. The American Gaming Association echoed the concern from a different angle, saying contracts tied to armed conflicts would not be permitted under state or tribal law.
Polymarket did not respond to requests for comment. The company has broadly argued that its contracts are valuable because they crowdsource information in volatile situations and help the public gauge risk, especially when conventional reporting lags or lacks clarity.
On some markets related to Middle East violence, Polymarket includes a disclaimer explaining that the company has spoken with people directly affected by attacks who “had dozens of questions” that weren’t being answered by traditional media. “Prediction markets,” the platform wrote, “gave them answers in ways that TV news and X could not.”
While some of Polymarket’s rivals, such as Kalshi Inc., allow bets on geopolitical outcomes, they have so far stopped short of anything that references military action or invasion. Kalshi’s closest equivalents include contracts on whether politicians — in the United States and abroad — will be out of office by a specific date.
“Kalshi avoids markets based on war altogether due to the extremely harmful incentives they can create,” a spokesperson said.
Polymarket operates under a different regulatory regime than Kalshi because it has technically been off limits to US customers since a 2022 settlement with the Commodity Futures Trading Commission. It uses cryptocurrency-based accounts that can allow trading pseudonymously without the kind of identity verification typical on US-regulated platforms.
Polymarket is now in the process of opening a US platform after acquiring a CFTC-approved exchange. The beta version of the US operation has emphasized mostly sports event contracts.
Cheryl Isaac, a partner at K&L Gates who advises clients on derivatives law, said that the Commodity Exchange Act gives the CFTC the authority to bar event contracts related to war, terrorism and assassination if it determines that they are contrary to the public interest.
“It is not yet clear how the new CFTC Chair will address some of these issues, and the CFTC has largely been silent on this topic under the current administration,” Isaac said.
In 2024, the CFTC proposed — but did not finalize — changes to its rules that would have clamped down on these kinds of wagers. The agency wrote at the time that speculation of this sort “at a base level, is offensive” and could potentially “increase the risk of a terrorist attack, assassination or act of war by creating financial incentives for a perpetrator to take a position and then profit by carrying out the heinous act themselves.”
The CFTC did not respond to requests for comment.
Catherine Cortez Masto, a Democratic senator from Nevada, and 11 other senators recently released a joint letter arguing that the law “expressly prohibits” the kinds of financial contracts Polymarket has offered.
“If prediction market contracts that implicate military operations or other national security considerations are manipulated by insider information, or even listed, it is possible for foreign adversaries to use this to their advantage,” the letter to the incoming chair of the CFTC said.
A spokesperson for ForecastEx, a prediction market owned by Interactive Brokers Group Inc., said the firm is regulated by the CFTC whose rules, it said, “prohibit” contracts tied to terrorism, assassination or war.
The stakes in these fights continue to escalate because prediction markets have become so much bigger with increasing ties to the traditional financial system. Intercontinental Exchange agreed last year to invest as much as $2 billion in Polymarket.
The military and geopolitical contracts offered by Polymarket are still a relatively small part of its business — with the category accounting for less than 10% of the volume, according to user-compiled data on Dune Analytics. But they have been a big source of growth in recent weeks as conflicts around the world have heated up.
The current slate of war-related contracts is only the latest instance of prediction market companies testing the boundaries of what’s legally permissible as they open up new corners of American life to financial speculation.
Before it was barred from operating in the US, Polymarket came under scrutiny for offering unregulated financial products to American customers. Kalshi, meanwhile, got approval to run its exchange from the CFTC, but later challenged the agency in court in order to offer trading on the outcome of elections. Kalshi and other prediction markets have recently been accused of violating state laws with their contracts tied to the outcomes of sports games.
