Polymarket users won big with unusual bets on US attack on Iran
FT analysis identifies 12 accounts on platform that made large well-timed wagers just ahead of start of conflict
The US attack on Iran was preceded by a number of unusually large and well-timed bets that made a combined profit of $330,000 and were placed by 12 suspicious accounts in the days before Saturday morning’s air strikes.
The FT has identified wallets on online prediction market Polymarket that collectively placed $66,993 in wagers that an attack would come by Saturday. About half of the bets made by these accounts came in the six hours before the strike.
“If a new wallet makes a very large bet on a single issue, you have to wonder why they’re doing that,” said Matt Saincome, chief executive of financial data provider Unusual Whales. “We do see people do that who are wrong . . . but it makes you think, perhaps that’s an insider.”
The FT identified the accounts in two steps. First, by identifying bets that were unusually large given the odds on offer, based on analysis of bets made in other political betting markets in recent months. One of the Iran markets contained more than 20 times as many outlier bets as an average market of its size.
Second, these outlier bets were then sifted to identify wallets that only placed bets on Iran-related markets, sold none of their positions early and had a perfect record.
After sifting for these factors, the FT identified 13 wallets, of which 12 opened their accounts just days before the attack. The bulk of their bets were placed in the 24 hours leading up to the attack, meaning they were betting on an assault coming within a day.
The profits highlight how anonymous betting sites such as Polymarket, which do not require customers in most jurisdictions to give their names and which work using crypto, may pose a bigger problem than previously recognised to the security of sensitive information if insiders start to trade on them. Military operations are a particular issue, given that they often rely on surprise.
Online discussions among users of prediction platforms frequently focus on how insiders can make money — and whether other bettors can mimic them.
The FT also uncovered another indicator of unusual betting patterns. Other, older Polymarket markets on whether the US would strike Iran by earlier dates in February saw the implied odds — which are determined by prices traders pay — of success become more distant as the deadline approached and the time left for the US to attack shrank.
However, in the run-up to the attack on February 28, the implied probability rose about 20 hours prior to the assault.
Polymarket, the Pentagon and the White House did not respond to requests for comment.
In the US, prediction markets are regulated as financial derivatives by the Commodity Futures Trading Commission. Because many market participants use futures to hedge against risks to their own business — such as a farmer worried about crop yields — the regulator permits “informed” trading.
However, it is illegal to “trade on information that has been misappropriated from someone else to whom it legitimately belongs”, said Peter Malyshev, a partner at law firm Sidley. A government employee who used information obtained in the function of their role would similarly be trading on so-called material non-public information, said Malyshev.
Unlike in mainstream financial markets, all trades and payouts on Polymarket are processed using blockchain technology, meaning transactions are public and can be traced to single, anonymous wallets that are visible to regulators and rival traders. That transparency has helped fuel an online culture of bettors hunting for potential insiders and copying their trades.
Democrats have criticised suspected insider trading on Polymarket. Senator Chris Murphy said on Sunday that it was “insane” that trading on military actions was legal and said he was “introducing legislation ASAP to ban this”.
The CFTC, which has maintained a light-touch approach to the fast-growing prediction market economy, issued an advisory on Wednesday asserting that it has “full authority to police illegal trading practices” on prediction markets, including the “misappropriation of confidential information”, fraud and manipulation. The CFTC declined to comment further.
In the first case of its kind, Israel last month brought prosecutions against two reservists suspected of using classified information to bet on the country’s military operations.
The FT identified eight accounts that made profits totalling $405,000 from unusually large bets at long odds on imminent action by the Israel Defense Forces.
The FT has also found a similar pattern of bets in a market related to the US government’s capture of Nicolás Maduro in January.
The implied probability of Maduro’s removal from office remained low throughout December and was at about 9 per cent when the US operation that seized him began in the early hours of January 3.
Six accounts were set up between December 30 and January 2 that had no subsequent activity, only bet on Venezuela-related topics and maintained a perfect betting record. They collectively staked $9,807 at prices that would later pay out $133,878.
In addition, a seventh account, which was set up just a few days earlier, placed $32,000 of bets on Maduro-related markets, making $404,222.
Not all suspicious wagers come from informed insiders, however. Multiple traders posting on X at the start of this month believed they had spotted an insider betting on the US striking Iran before February 9, after a wallet, which had only placed one previous punt, placed a large bet on odds of just 2.5 per cent.
No strike took place, and the account ultimately lost almost $100,000.