When James* couldn’t find a sporting match to wager on, he placed money on whether the Supreme Leader of Iran would keep his job. US President Donald Trump had a long history of threatening Iran, and the US military had previously attacked Iranian nuclear facilities in summer 2025.
By late February, James, a 33-year-old Texan (who asked to use a pseudonym) had been chasing his losses on sports betting apps. He’d lose $100 on a basketball game, then lose another $100 trying to recuperate the money. Most of his betting was done in what he describes as “a haze”; he’d bet on practically anything and everything he could. Politics. Obscure sports. Whether a broadcaster would say a certain word. That’s how the prediction market Kalshi — which uses the slogan “Trade on everything” — became one of James’s most-used apps. It’s also how he became one of the many Kalshi users who, all told, placed a combined $54 million worth of “predictions” that Ayatollah Ali Khamenei would be replaced.
When Khamanei was killed at the start of the US-Iran war, Kalshi froze the bets. No one got paid. The company, which did not respond to a request for comment, has previously said this particular prediction was purely about political succession, not death.
“I do feel weird about it,” James says of his Kalshi bet, “even if I don’t remember it.” He pauses, then lets loose a nervous laugh. “I guess I could use the money, though.”
Experts point out that profiting off war — even through the markets — is nothing new. Military contractors and traders of oil futures have been doing it for decades. But now, prediction markets have allowed for war profiteering with a few taps on an iPhone.
In recent months, these markets have become exceedingly popular and experienced a fundraising boom. Kalshi and Polymarket, the most well-known of this group, are worth tens of billions of dollars, while venture capitalists are rushing to find the next hit app. All the while, medical professionals are warning of the extreme public health risk these apps cause.
John Ackley, a gambling counselor based in Oregon, says he’s starting to see more clients who are addicted to prediction markets, and they’re all men under 35. What’s more, it’s difficult to get them to stay in treatment.
Experts also warn about the national security threats posed by these apps, especially considering the potential for insider trading. A US soldier was recently charged with using classified information to profit over $400,000 betting on Nicolás Maduro’s capture, while Polymarket users were able to wager on the fate of a US airman downed in Iran. Those same users have been able to trade on whether Israel would launch a ground offensive in Gaza by a certain date, or whether Iran-Israel tensions would escalate into direct strikes.
Attempts to rein in the expanding influence of these apps has been met with stiff resistance, much like attempts to regulate AI. The Commodity Futures Trading Commission (CFTC) has positioned itself as the sole regulator for prediction markets.
“The CFTC during the transition from the Biden administration to the Trump administration became much more laissez-faire,” says Dustin Gouker, a gaming industry consultant who writes extensively about sports betting and prediction markets.
As of this writing, the CFTC has one sitting board member: chairman Michael Selig.
Selig, an attorney, previously worked at the law firm that presents Polymarket, and he also represented the venture capital firm that invested in Kalshi. Most recently, Selig’s CFTC has gone on offense. It is suing the governments of Arizona, Connecticut, and Illinois for attempting to restrict the use of prediction markets in their states, arguing that these apps offer “event contacts” that are protected by federal law.
“These firms are making record profits while exposing Illinoisans to gaming products with no basic consumer protections or oversight,” says a spokesperson for Illinois Governor JB Pritzker.
“The Trump administration,” the spokesperson added, “is carrying water for companies driving well-documented and lucrative insider trading schemes. Illinois isn’t backing down — we will continue to fight to protect Illinois consumers.”
The CFTC did not respond to requests for comment.
All of this raises the question, why is this legal? According to Danny Funt, an author who recently wrote a book about the rise of American sports gambling, prediction markets are legal because they claim they’re not facilitating gambling. Rather, they’re offering “events contracts,” not dissimilar to betting on crop yields.
Many states are challenging that logic in court. For instance, in Wisconsin, a lawsuit brought against Kalshi by the Ho-Chunk Nation argues that sports-related event contracts amount to unlicensed gambling that infringes on tribal and state gaming rights.
Funt and multiple other experts interviewed for this story explain that the trouble technically began in 2018, when the Supreme Court struck down the federal ban on state-authorized sports betting and affirmed that states have the power to legalize and regulate gambling within their borders. Since then, some 38 states — plus Washington, DC and Puerto Rico — have legalized gambling.
“Then, over the past two years, things began to change where Kalshi blew up offering election betting,” Funt explains. “The CFTC became more forgiving toward that, in part because of commissioners that the Trump administration appointed.”
Selig was appointed by Trump last year, and there is also a former CFTC commissioner on the board of Kalshi. The company has been advised by Donald Trump Jr. (who has also advised and invested in Polymarket via his VC firm).
“Michael Selig was appointed to head the CFTC because he is a lawyer representing the various firms that are regulated by the CFTC,” argues Craig Holman, an ethics and campaign finance lobbyist with the group Public Citizen. “He was appointed to deregulate the entire industry and to allow these firms and the prediction markets to do whatever they want.”
Amid criticisms over conflicts of interest and national security concerns, the White House has largely remained silent on the topic of prediction markets. Its press office did not respond to Inkstick’s request for comment. The White House has, however, recently advised its staff not to use these apps.
To Holman, this is laughably too little, too late.
“Trump is appointing millionaires and billionaires to regulate their own industries, and of course their idea is to deregulate them so their industry can get richer,” he says. “At our expense, I may add.”
As Holman sees it, the first step to remedying the confluence of issues presented by prediction markets is to recognize that it’s no different from gambling. But he knows this alone won’t solve the problem, as many US voters and politicians from both major parties are in favor of legalizing both gambling and sports betting.
That’s what worries Jonathan Cohen, an author of a book on gambling and the leader of gambling policy at the American Institute for Boys and Men. Cohen calls sport betting — fueled by ubiquitous marketing from companies like FanDuel and DraftKings — a “gateway drug” into the world of gambling.
In other words, once users are hooked on sports betting, they’re more likely to bet on anything. Cohen and Ackley, the counselor, both used the same term for this: “the gamblification of everything.”
“If you thought sports gambling was bad, now we have all the things you know and hate about sports gambling, but also that threatens national security,” Cohen says. “So that’s good luck to us, I guess.”
From the national security perspective, Holman thinks it’s critical to pass legislation that prevents people who could potentially have access to insider information (especially government employees) from cashing in on that intelligence. Currently, no such law exists, leaving the White House and others to offer guidance that’s not legally binding.
Meanwhile, Ackley is watching the battle between states, the CFTC and the markets unfold in court, and he’s trying to help as many people as he can.
There’s only one word he can think of to describe the rise of gambling addiction that’s being exacerbated by prediction markets.
“This is an epidemic,” he says, “and it’s harming the souls of a generation. We’re seeing it in teenagers who are getting onto these sites through illicit means, and it is shaping their perceptions of the world and wealth and self-image.
“We kind of view it in the field as [if] there’s a tidal wave out there that’s coming at us,” he adds. “We can’t see the tidal wave yet, but we see the water rushing out from the shore.”
Top photo: Tarek Mansour, cofounder of Kalshi, delivers an address at a summit in Portugal in 2021 (Web Summit/Wikimedia Commons)
