Insider Trading Allegations Hit Prediction Markets Over Iran Bets

Last updated: March 1, 2026 at 3:51 p.m. ET

First published: March 1, 2026 at 3:31 p.m. ET

Summary

Allegations of insider trading have emerged in prediction markets and crypto-based exchanges tied to bets on the Iran conflict. Platforms named in market activity include Polymarket, Kalshi and the decentralized exchange Hyperliquid. Kalshi also faces controversy over its handling of a market tied to whether Iran’s supreme leader would remain in his position. These developments prompted intensified scrutiny of market integrity, platform controls and trading risk during a period of regional military action.

What happened

This weekend traders and institutional participants turned to prediction markets and crypto-based decentralized exchanges to hedge or speculate on outcomes and market impact of U.S. and Israeli strikes on Iran. Activity persisted as the attacks and subsequent retaliatory actions continued into Sunday. Allegations of insider trading have been raised in connection with discrete bets tied to those events, and critics have singled out the way one platform managed a particularly sensitive question about Iran’s supreme leader.

Key, verifiable points:

• The events and related trading activity are dated March 1, 2026 (first published 3:31 p.m. ET; updated 3:51 p.m. ET).
• Platforms involved include Polymarket, Kalshi and Hyperliquid.
• Kalshi faced a separate controversy specifically tied to a market contract on whether Iran’s supreme leader would remain in his position.

How prediction markets and crypto DEXs were used

Prediction markets and crypto-based decentralized exchanges enable traders to take positions on event outcomes and political developments. During major geopolitical events, these venues can function as:

• Short-term hedges against macro or regional risks
• Instruments for speculation on discrete binary outcomes or probability-adjusted payoffs
• Price-discovery mechanisms reflecting collective expectations of event probabilities

The use of these instruments increases during periods when traditional markets are closed or illiquid, as participants seek alternative mechanisms to express views on rapidly evolving events.

Market integrity and the insider trading allegations

The essential allegation is that some actors used non-public information or privileged access to place bets that generated outsized profits or that altered the expected settlement of event contracts. Separately, criticism centers on how a platform handled a sensitive contract question about Iran’s supreme leader.

Why this matters for institutional traders and risk managers:

• Event markets that lack robust surveillance and controls can be vulnerable to manipulation or unfair information asymmetry.
• Settlement procedures and contract design for politically sensitive events affect legal and reputational risk.
• Rapid, high-profile trades during geopolitical crises can amplify market stress and liquidity squeezes.

Platforms and operational considerations

Polymarket, Kalshi and Hyperliquid represent different technical and governance models: centralized event exchanges, regulated event-contract venues, and decentralized marketplaces respectively. Key operational considerations for participants include:

• Know the contract terms, settlement criteria and dispute-resolution rules before entering positions.
• Monitor platform announcements and contract cancellations or amendments that can affect exposure.
• Evaluate counterparty and custody risks on decentralized venues versus centralized exchanges.

Implications for traders and institutions

Professional traders and institutional investors should treat prediction-market activity during geopolitical shocks as a component of broader event-risk management. Practical steps include:

• Limit position sizes relative to available liquidity to avoid outsized market impact.
• Maintain real-time monitoring of trades and order-book depth across venues used for hedging.
• Ensure compliance and clear documentation for any trades executed around sensitive events.
• Reassess settlement risk and potential legal exposure tied to the specific phrasing of event contracts.

Regulatory and reputational context

High-profile allegations of insider trading and controversies over contract handling increase regulatory attention and can accelerate calls for stricter oversight. Platform governance, transparent settlement mechanisms and robust surveillance tools are central to maintaining credibility with institutional users.

What to watch next

Traders and analysts should monitor:

• Any official statements or policy changes from the platforms involved.
• Shifts in liquidity or abrupt contract cancellations and amendments.
• Broader market responses in equities, FX and commodities once major exchanges reopen.
• Any enforcement or legal actions tied to alleged insider trading or market manipulation.

Bottom line

Prediction markets and crypto-based decentralized exchanges played a heightened role during the Iran-related events by providing active venues for hedging and speculation. Allegations of insider trading and controversy over contract handling underscore the need for stronger market controls, clearer settlement rules and careful risk management by professional traders and institutions.