California Senator Adam Schiff has introduced legislation aimed at clamping down on prediction markets offering contracts related to warfare and death, following controversy over platforms accepting wagers on conflicts in Iran.

The Discouraging Exploitative Assassination, Tragedy, and Harm Betting in Event Trading Systems Act (cheerfully shortened to the DEATH BETS Act) seeks to clarify existing prohibitions in the Commodity Exchange Act. According to Schiff, betting on war and death creates dangerous incentives where insiders can profit from classified information whilst national security takes a back seat.

What the Bill Actually Does

The proposed legislation adds specific language to the CEA, which already bans markets on terrorism, assassination, and war. The amendment would prohibit any contract that involves, relates to, or references an individual’s death, or could otherwise be construed as correlating closely to death.

That’s quite a broad definition. It’s prompted debate about whether the bill actually addresses a real gap in regulation or simply restates what’s already on the books.

The Kalshi Situation

The controversy kicked off when Kalshi, a regulated US prediction market platform, decided not to pay out users who’d backed Ali Khamenei to step down as Iran’s Supreme Leader. The company argued its existing rules already prevented profiting from death, though some users disagreed strongly enough to file lawsuits.

Kalshi CEO Tarek Mansour has been adamant the company follows CEA rules to the letter.

The platform has since updated its terms with an explicit Death Rule and launched an advertising campaign making clear it doesn’t offer death markets. The company also highlights its ban on insider trading and its commitment to operating under US law.

Polymarket Takes a Different Approach

Polymarket, operating internationally rather than under US regulation, settled its Khamenei market upon his death and continues to run markets on warfare. The platform had markets on the timing of US strikes on Iran, raising concerns about insider trading.

Israeli authorities are now investigating one account, Magamyman, which reportedly gained over $650,000 from wagers on Middle East conflicts. Israel has already indicted two individuals for allegedly using classified information to place bets on military operations.

This week, Polymarket highlighted several war-related markets to users. Russian military actions in Ukraine, potential Israeli strikes on Yemen, that sort of thing. These markets run on Polymarket’s international platform rather than its recently launched US site, placing them outside CEA jurisdiction.

Regulatory Questions

Senator Schiff argues prediction markets can’t be trusted to self-regulate, particularly with the CFTC allegedly turning a blind eye. He’s described the sector as the Wild West and insists clearer legislative boundaries are essential.

Representative Mike Levin, introducing a companion bill in the House, has gone further. He’s warned these markets could lead to deaths of American service members, pointing to over half a billion dollars wagered on the timing of US military strikes as evidence the system needs tightening.

Still, with Kalshi already avoiding war and death markets, and Polymarket operating internationally beyond US regulatory reach, questions remain about what the DEATH BETS Act would actually accomplish beyond clarifying intent.

International Pressure

Polymarket faces regulatory headaches beyond the US as well. The Netherlands has threatened weekly fines of $500,000 if the platform continues accepting Dutch users, particularly after its markets on Dutch elections attracted over $100 million in trading volume.

Several other countries have raised similar objections to Polymarket offering markets on political elections and other events prohibited under their gambling regulations. Enforcement against an international platform remains challenging, granted.

Whether legislative clarification will make any practical difference to how these platforms operate remains to be seen, but it’s clear US lawmakers are taking notice of prediction markets in ways they haven’t before.