Geopolitical Events

The CFTC banned war contracts in 2011. On February 28, $529 million was riding on whether the United States would strike Iran. The prohibition followed the name. The money followed the death.

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The Commodity Futures Trading Commission banned war contracts in 2011. Regulation 40.11, implementing Section 5c(c)(5)(C) of the Commodity Exchange Act: a categorical prohibition on event contracts involving war, terrorism, or assassination. No case-by-case analysis required. The categories are prohibited.

On February 28, 2026, $529 million had been wagered on a Polymarket contract titled “US strikes Iran by…?” The contract had been live since December 22, 2025. It was not listed as a war contract. It was self-certified as a geopolitical event contract.

The prohibition was in force the entire time. The money flowed through anyway. What sits between the ban and the half-billion dollars is a gap in naming — a space where “war” became “geopolitical events” and the regulatory architecture, designed to constrain the category, lost sight of the activity underneath it.

What the money knew

On February 12, an IDF reservist and a civilian were indicted in Tel Aviv District Court for using classified military intelligence to place bets on a prediction market. They had wagered on four events related to Israel’s June 2025 strikes on Iran and profited approximately $152,000. Israel called it “a grave ethical failure.” It is also the only prosecution of its kind anywhere in the world.

The same mechanism that Israel prosecuted in one case has operated, without prosecution, across several others.

In January, an account called “Burdensome-Mix” wagered approximately $32,500 on Polymarket that Maduro would be removed from power — when the market priced that outcome at 5.5 percent. US forces seized Maduro the next day. The account, created less than a week prior and used exclusively for Maduro-related bets, collected $436,759.

In February, blockchain analytics firm Bubblemaps identified six wallets created that month, funded hours before the February 28 Iran strikes, that collectively bet on the February 28 contract and netted over a million dollars. One wallet spent $60,816 and earned $499,864. Bubblemaps traced wallet connections through shared Binance deposit addresses. One linked account — “Skoobidoobnj” — had previously profited from two separate surprise attacks on Iran in 2025: Israel’s Operation Rising Lion in June and the US B-2 bomber strikes on nuclear facilities. Three military operations. Three correct bets. The evidentiary question is not whether the mechanism exists — the Israeli prosecution proved it does — but whether the scale of its operation in US markets has simply not been prosecuted.

A separate account, “Magamyman,” placed its first trade on the February 28 contract 71 minutes before the news broke, when the market priced a strike at 17 percent. It collected $553,000 across Iran-related contracts. Unlike the Bubblemaps wallets, this was an established account — created in October 2024, 88 Iran-focused predictions total, losses on several previous strike dates before hitting on February 28. The pattern is genuinely ambiguous: either a serial gambler who kept betting until one landed, or intermittent access to advance knowledge. Israeli police opened an investigation. No charges have been filed.

What is not ambiguous is the architecture. Half a billion dollars wagered on the timing of military strikes, on a pseudonymous, cryptocurrency-based platform, where anyone with advance knowledge could convert a classified briefing into profit without identification.

Through the name

The law that should have prevented this already exists. CEA Section 5c(c)(5)(C)(i) and CFTC Regulation 40.11 categorically prohibit event contracts that involve, relate to, or reference terrorism, assassination, or war. The regulation was finalized in 2011. It does not require case-by-case adjudication.

Polymarket’s contracts on Iranian strikes were not listed as war contracts. They were self-certified as geopolitical event contracts — a category that exists in the regulatory structure’s negative space, neither explicitly prohibited nor explicitly authorised. The self-certification process allows a registered exchange to list a contract by notifying the CFTC and waiting a prescribed period. If the CFTC does not object, the contract goes live. The CFTC did not object.

The gap between “war contract” and “geopolitical event contract” is not a legal grey area. It is a naming decision. The activity — wagering on whether a country will be bombed — is identical regardless of what you call the contract. The name determines which regulatory category applies. The prohibition follows the name, not the activity. Rename the activity and it exits the constraint.

This logic has an endpoint, and the market found it. In the days after the Iran strikes, Polymarket hosted a contract titled “Nuclear weapon detonation by…?” It accumulated approximately $850,000 in volume. Before the strikes, the contract had attracted about $10,000 total. Afterward, volume surged to nearly $244,000 per day.

Polymarket removed the contract quietly. Not because of regulation — the CFTC took no action. Because public backlash made the naming untenable. When the classification “geopolitical event contract” was applied to nuclear detonation and enough people noticed, the absurdity overwhelmed the category. The regulatory framework played no role. The market policed itself at the point where the naming became indefensible — and only there.

The corrupted source

In November 2025, a Polymarket contract asked whether Russia would capture a specific intersection in the Ukrainian town of Myrnohrad by mid-November. Trading volume exceeded $1.3 million. The contract resolved based on the Institute for the Study of War’s interactive conflict map — a tool used by policymakers, journalists, and humanitarian organisations for ground-truth assessments of territorial control.

An ISW geospatial researcher edited the map to show Russian control of the intersection. There was no confirmed Russian advance on the ground. YES bettors collected returns of up to 33,000 percent. By the following morning, ISW had reversed the edit and fired the researcher. The institute stated that it “does not consent” to its maps being used for gambling, describing its mission as serving policymakers, journalists, and humanitarian groups.

The prediction market didn’t only monetise advance knowledge of violence. It created a financial incentive to manufacture false knowledge. The resolution source was corrupted because the market’s existence gave someone with editing access a reason to corrupt it. An intelligence tool used for wartime decision-making was falsified for a payout.

The response

Six senators, led by Adam Schiff, wrote to the CFTC on February 23 demanding clarification by March 9 — this Monday — on whether contracts that resolve upon an individual’s death are prohibited under the existing categorical ban. The letter cited Regulation 40.11. It did not ask for new law. It asked why existing law was not being enforced.

On March 5, Senators Merkley and Klobuchar introduced the End Prediction Market Corruption Act. The bill bans the president, vice president, members of Congress, and senior executive officials from trading event contracts. The penalty: at least $10,000 per violation. No Republican co-sponsors.

The Schiff letter addresses whether the law is being enforced. The Merkley bill addresses who is allowed to trade. Neither addresses the structure: the existence of a liquid, pseudonymous, cryptocurrency-based market where classified intelligence converts to money without identification. A $10,000 penalty against wallets earning $436,000 to $553,000 per event is a cost of doing business — not a deterrent but a line item. The enforcement mechanism is calibrated to the name of the problem (public corruption by identifiable officials) rather than its architecture (anonymous monetisation of advance knowledge of state violence).

On March 2, a federal judge in Nevada remanded Kalshi’s lawsuit to state court, ruling that the CFTC does not preempt state gambling law. The same contract can now be simultaneously a federally registered derivative and a state-prohibited wager depending on which courthouse you stand in. CFTC Chair Selig responded by signalling new rulemaking to “set a single standard across all 50 states.” The regulator is competing with states for jurisdictional control of the classification itself — fighting over who gets to name the activity — while the activity proceeds uninterrupted on pseudonymous blockchains that neither jurisdiction can effectively police.

The architecture

A timeline:

In July 2025, the Trump administration dropped both DOJ and CFTC investigations into Polymarket — investigations opened under the Biden administration after the FBI raided CEO Shayne Coplan’s apartment and seized his electronic devices. In August 2025, Donald Trump Jr. joined Polymarket’s advisory board alongside a strategic investment in the double-digit millions from 1789 Capital, where Trump Jr. is a partner. In November 2025, the CFTC expanded legal pathways for prediction market contracts. In January 2026, the Maduro bets produced $436,000 for a single account. In February, the Iran contracts reached $529 million. In early March, the nuclear detonation market opened, attracted $850,000, and was removed — not by the regulator, but by the platform under public pressure.

I present this as timeline, not proven causal chain. The sequence is public record. The interpretation is contested. What is not contested is that the investigative apparatus was dismantled before the market for violence scaled.

The question most people are asking about prediction markets is the wrong one. The question is not whether insiders are trading. The Israeli prosecution proves the mechanism exists. The Bubblemaps analysis — particularly one wallet’s accuracy across three separate military operations — suggests it operates at scale. The question is what kind of market this is.

The CFTC banned war contracts because it understood that financial markets on violence create incentives for violence. That understanding was correct in 2011 and it is correct now. The ban exists. The money renamed war as “geopolitical events” and flowed through the classification gap. The nuclear detonation market sat in that gap until public revulsion forced it out. An intelligence analyst’s conflict map was falsified because the market created a reason to falsify it.

Every briefing in every secure facility in every country with military intelligence is now, structurally, a tradeable asset. The pseudonymous architecture ensures the trade can be executed without identification. The cryptocurrency rails ensure it can be settled without banking oversight. The classification gap ensures it can be listed without triggering the prohibition.

On Monday, six senators expect a response from the CFTC on whether existing law prohibits what is already happening. The law does prohibit it. What the law calls the prohibition and what the market calls the activity no longer refer to the same thing. The money found the space between the name and the act, and half a billion dollars flowed through.

Sources

- Solen