The Iran War Shows Why Polymarket Should Be Illegal
This weekend, an unnamed person with the user name “Magamyman” began placing bets that the US and Israel would soon begin strikes on Iran on the news betting site Polymarket. Seventy one minutes later, bombs began to drop. We have no idea who that person is, but they ended up placing 7 bets that paid out a lump sum in excess of $500,000.
It appears that a Polymarket account called “Magamyman” made $515,000 in a single day betting on last night’s U.S. strike on Iran, with the first trade placed 71 minutes before the news broke publicly.
Putting aside for a moment the grotesque prospect of betting on whether countries will go to war and the thousands that would end up dying in these scenarios, the chronic insider trading in these “news” betting markets should encourage us to ban them while they are still new enough to do so.
Executives at these betting sites claim that their services are closer to a stock market than a casino. Kalshi founder CEO Tarek Mansour has said the company wants to “financialize everything and create a tradable asset out of any difference in opinion.”
The websites work by offering bettors “contracts” for different news scenarios, such as election results, or in this week’s case, wars with foreign nations. Let’s be clear here, these are prop bets, more akin to betting on who wins the coin flip at the Super Bowl than the any financial market.
The stock market is very strictly regulated and insider trading is rightly banned. Those with insider knowledge have an inherent advantage over those who are not in the know, an inherent advantage that is obviously unfair.
These news betting sites don’t have similar controls, and it’s apparent whenever big news breaks that a small handful of decision-makers – and those close to decision-makers – are profiting handsomely from their own decisions.