On Tuesday, U.S. Representatives Seth Moulton and Jim McGovern sent a letter to Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam, calling on the agency to crack down on offshore prediction markets that allow betting on war and military conflicts.
The lawmakers' frustration was sparked by the appearance of betting contracts on prediction platforms regarding the potential rescue of U.S. pilots in Iran. In their letter, the representatives specifically asked the CFTC to clarify its regulatory authority in preventing offshore platforms from offering such products.
“Turning war into a betting opportunity is sick. People are wagering on bombings, bloodshed, and military operations as if human lives are just numbers on a screen,” McGovern said in a subsequent statement. “These are not harmless bets.”
Regulatory scrutiny has intensified as prediction markets like Kalshi and Polymarket have surged in popularity during the 2024 U.S. election cycle. These platforms allow users to trade on the outcomes of real-world events, ranging from geopolitical developments to sporting events.
Addressing the recent controversy, Moulton took to X (formerly Twitter) to publicly criticize Polymarket. He pointed out that the platform had allowed users to bet on whether American pilots stranded in Iran would be rescued, noting, “These people could be your neighbors, friends, or family, while others are gambling on whether they make it home.”
The Limits of Regulatory Authority
In response to the criticism, Polymarket stated that it had removed the market in question and was investigating how the contract bypassed its internal review mechanisms. The CFTC has asserted “exclusive jurisdiction” over prediction markets and is currently working to establish a clear regulatory framework as the industry rapidly expands.
Under current regulations, the CFTC prohibits the listing of contracts involving terrorism, assassination, or other illegal activities. However, effectively policing platforms that operate offshore while serving a global user base remains a pressing challenge for the commission.
Lawmakers have previously raised concerns regarding the risk of insider trading on these platforms, most notably following contracts earlier this year that bet on the arrest of Venezuelan President Nicolás Maduro. As these platforms continue to broaden their scope, the CFTC faces mounting political pressure and compliance hurdles in defining the boundary between legitimate financial products and prohibited gambling.
