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Lawmakers call for CFTC crackdown on prediction markets after bet on downed U.S. airmen

By
Megan Cerullo
Reporter, MoneyWatch
Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.
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Megan Cerullo

/ CBS News

Lawmakers are pressing securities regulators to crack down on prediction markets amid several recent incidents of people using the increasingly popular platforms to bet on events tied to the Iran war and other government actions. 

In an April 6 to Commodity Futures Trading Commission Chair Michael Selig, seven House Democrats demanded that the agency tighten its oversight of prediction markets after Polymarket allowed customers to wager on the fate of two U.S. airmen shot down over Iran last week. 

Betting on life and death?

"It is morally corrupt and completely unacceptable for these platforms to allow people to bet on whether American service members live or die," Rep. Seth Moulton of Massachusetts, a leader of the effort,  in a statement. "This is not a game. The CFTC has the authority to stop this, and we want to know why it hasn't."

The CFTC did not immediately respond to a request for comment on the lawmakers' letter.

Companies like Polymarket and rival Kalshi let users wager money on the outcome of elections, sports contests and many other events. Yet while their popularity has exploded, the companies are attracting attention from lawmakers and other critics who say they violate anti-gambling regulations and who raise concerns about the integrity of trading activity on the platforms. 

Polymarket allowed speculators last week to bet on whether the U.S. airmen shot down in Iran would be rescued by April 3 or April 4. Both crew members from the downed F-15E fighter jet were rescued. The company said it took the contract down immediately, but acknowledged in a posted on social media last week that the wager had "slipped through" the company's internal safeguards. 

Both Polymarket and Kalshi have recently said they are strengthening their controls to prevent insider trading. 

"Wild West" markets

In their letter, the lawmakers said prediction markets "resemble an unregulated 'Wild West'," pointing to recent instances of alleged insider trading. 

Those included a Polymarket client who made $436,000 in January by appearing to anticipate the capture of former Venezuelan President Nicolás Maduro by U.S. forces. Another user of the platform also appeared to make hundreds of thousands of dollars betting on the timing of U.S. strikes on Iran. 

"[R]ecent high-profile instances of alleged insider trading on prediction market platforms relating to U.S. government actions — including the military's intervention in Venezuela and our recent attack on Iran — have fueled concern that the CFTC does not have adequate control over these fast-growing markets," the lawmakers wrote. 

An existing CFTC rule bans contracts that "involve, relate, or reference terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law," the lawmakers noted in their letter. 

 The agency "should apply its existing rule prohibiting bets relating to terrorism, assassinations and war. This should especially be clear for contracts that are as morally obscene as betting on military action in Venezuela and Iran," they wrote. 

The House group asked that the CFTC respond by April 15 to a series of questions about its oversight of prediction markets, including why it has failed to take action against war-related bets. They also asked if the agency is aware of any conflicts of interest between financial market players and high-ranking government officials.

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