Polymarket and Kalshi are trying to raise money at valuations that put them among the top consumer fintech names, even as Washington moves closer to writing new rules for the product they sell. Both companies are reportedly in early fundraising talks, which could be worth around $20 billion each.
This fundraising talk is happening in the middle of a political firestorm.
Iran-related contracts transformed the prediction markets from an idiosyncratic prediction niche to a question of insider information and incentives around war. Reuters reviewed Polymarket markets related to the timing of attacks and Khamenei’s removal and found that about $529 million had been wagered on timing-of-attack contracts and about $150 million on Khamenei-related contracts, in addition to claims of unusually well-timed trading that generated about $1.2 million in profits across six accounts.
Now lawmakers are drafting legislation, and the CFTC says it is also moving toward new regulations.
Wall Street believes that probabilities will become part of the information system. But Washington stands in his way because it believes the system can reward the wrong people at the worst times.
Wall Street buys the probability story
Prediction markets convert attention into trades and trades into fees, while also producing a live probability feed that can be packaged as data.
That second product is the part that takes prediction markets out of the betting bucket and puts them in the same group as market data, polls and financial terminals, because the output is designed to look and behave like a quote.
Media partnerships have started distribution for them. CNBC signed a multi-year deal with Kalshi to integrate its probabilities into TV and digital programming starting in 2026, bringing event contract pricing into the daily stream of business news.
Dow Jones has signed an exclusive deal with Polymarket to infuse forecast market data into The Wall Street Journal, Barron’s and MarketWatch products, effectively treating a contract price as a piece of reporting infrastructure that can sit alongside earnings, quotes and election coverage.
Those deals also sharpen the consequences of a scandal, because the markets are no longer a novelty that people can ignore. Once probabilities become embedded in mainstream media, they begin to shape what readers think is plausible, urgent, or imminent. This is why regulators believe that the platforms must meet a higher standard of integrity, supervision and resolution.
It also explains why companies’ valuations continued to rise even as Iranian markets faced political criticism.
Iran turned the prediction markets into a Washington problem
The market’s brightest advantage is early knowledge, and the contracts with Iran have clearly shown that these platforms handle the kind of information that governments are trying to control.
On March 2, about $529 million was wagered on the markets on timing of the attack and about $150 million on contracts related to Khamenei’s death and dismissal. Just six accounts earned $1.2 million in profits from these contracts, all funded just hours before the raids that killed the Iranian leader.
Multiple other reports of newly created accounts making unusually well-timed bets on Iran also began to surface as the conflict escalated. This kind of mainstream reporting pulled Polymarket out of the crypto novelty category and landed it in the middle of government surveillance and enforcement.
The main issues these platforms now face are trust and fairness.
A prediction market only works if people believe the rules are stable, outcomes are assessed consistently, and the playing field is not tilted toward insiders. When the underlying event is military action, that trust problem becomes political, because the incentive to act early becomes an incentive to leak sensitive and even classified information.
That is why the policy response escalated so quickly.
Representative Mike Levin and Senator Chris Murphy are already working on legislation aimed at reining in the prediction markets after the Iran bets. This makes Congress directly responsible for defining which event contracts should be covered.
Separately, CFTC Chairman Michael Selig said the agency has submitted an advance notice of proposed rulemaking to the White House Budget Office and would soon move on to a proposed rule for the prediction markets. This tells us that a regulatory framework is in the works that could impact everything from contract design and monitoring to enforcement priorities.
The choice facing Washington is quite simple, even if the implementation is technical.
Regulators can treat prediction markets as legitimate event contracts and build in stronger monitoring and clearer limits, which could help the category scale with a better-defined rulebook.
They can also shield categories related to war, assassination and leadership removal, because those contracts concentrate insider risk and create ugly incentives.
A snapshot shows why this collision is difficult to mitigate:
| Flash point | What was reported | Why it attracted attention |
|---|---|---|
| Appreciation conversations | ~$20 billion each for Polymarket and Kalshi (early talks) | Venture pricing collides with legal risk |
| Timing markets in Iran | ~$529 million deployed | Event contracts tied to military action |
| Khamenei-related markets | ~$150 million deployed | Death and leadership outcomes as tradable contracts |
| Suspicious profit claims | ~$1.2 million across six accounts | Fear of insider knowledge linked to timing |
| Kalshi payout dispute | ~$54 million in claimed winnings | Battle of trust within the regulated player |
Kalshi’s own dispute shows why regulation alone does not end the trust issue.
On March 5, Kalshi was indicted for failing to pay $54 million to users who bet that Iran’s Supreme Leader would leave office before March 1. The class action lawsuit, filed in California, alleges that the company only invoked a death carveout provision after the Iranian leader was assassinated to avoid paying customers.
However, Kalshi says its rules on death trading were explicit, and it reimbursed fees and losses so users didn’t lose money.
That’s the kind of tension investors and policymakers are facing now.
Investors want growth, distribution and a clear argument for a probability feed that belongs in the mainstream.
Users want rules that feel stable when the outcomes become controversial and emotionally charged.
Regulators want to prevent a market from turning sensitive state action into a tradable instrument where the best trade is the best leak, because that risk becomes a governance problem once these prices start shaping the information environment.