Dubious Polymarket Wallets Gain $1.2 Million Preceding Iran Strikes, Igniting Political and Regulatory Outcry

Key Points

• Six newly funded wallets wagered on a US strike against Iran and received about $1.2 million in payouts.
• Lawmakers called the trades “insane” and demanded oversight, transparency, and new legislation.
• Regulators in the US and Europe increased scrutiny of offshore prediction markets following the episode.

A group of recently established Polymarket accounts had secured winning bets on the question “Will the US strike Iran by February 28, 2026?” several hours before American and Israeli jets bombed locations inside Iran on February 28. Six wallets that received funding during the 24 hours before the attacks placed wagers on YES shares and ultimately received close to $1.2 million in profits according to blockchain analytics provider Bubblemaps, and certain purchases occurred only hours before initial reports emerged about explosions hitting Tehran.

Bubblemaps documented one investment of approximately $61,000 that grew to $493,000, producing an 821% profit across several days. Analysis of order book information from Polymarket’s blockchain showed wallets identified as “Lettucehead718” and “suffix-295” completing transactions at identical times on February 27 when they purchased YES shares in the February 28 market. These accounts had engaged with no more than 10 markets since their creation and placed minor stakes on surrounding strike dates that Polymarket community members interpreted as decoy wagers crafted to make insider information appear like routine gambling.

The twenty biggest YES share owners in the February 28 market each controlled positions worth from $42,000 to $62,000, displaying a concentration that suggested one individual possibly scattered capital through different accounts hoping to remain undetected. Bubblemaps published wallet names they deemed questionable during their investigation, including “Planktonbets,” “Dicedicedice”, and “Neodbs,” although CEO Nicolas Vaiman explained the evidence seemed strong enough for disclosure while recognising definitive conclusions stayed out of reach. Polymarket tools programmer Gavelsvtw shared on X that Iran markets exhibited what resembled extreme insider trading where at least five wallets combined cleared $1,000,000 after spreading misleading bets on various dates, calling this the most apparent insider-style trading witnessed over the past year.

Increase in Trading Activity and Other Major Bets

Prediction market activity exploded as traders placed $529 million worth of bets on contracts related to the strikes without any regulatory oversight. The February 28 Iran strike contract attracted approximately $90 million in trading volume, becoming the most traded date for an attack on the nation by a massive margin. Traders placed $42 million on the next most popular contract, which predicted an attack by January 31.

Polymarket introduced multiple new contracts after tensions escalated in the Middle East, creating opportunities for traders to bet on various outcomes. The platform now features a trending bet on whether the Iranian regime will collapse by summer, alongside contracts about potential US and Israeli strikes this week. Users can also wager on when US forces might enter Iran, reflecting the uncertainty surrounding military actions.

“Magamyman” earned $553,000 in one day by betting that Iranian Supreme Leader Ayatollah Ali Khamenei would lose power after he died in Saturday’s attacks. The market had given this outcome only a 17% chance when the trader bought shares, but the investment of roughly $87,000 transformed into over half a million dollars within hours. Reports indicate that suspected insiders collected more than $1 million from contracts connected to the US-Israeli air strikes over the weekend, with one person allegedly gaining $550,000 from bets on Khamenei’s death. A Polymarket user made $400,000 earlier this year by betting on Venezuelan dictator Nicolás Maduro’s removal from power in January, displaying similar trading patterns.

Political Reaction and Growing Regulatory Examination

Sen. Chris Murphy responded to allegations of insider trading on Saturday by writing that people around Trump were profiting from war and death, calling the situation insane. The senator announced plans to introduce legislation immediately that would ban these types of prediction markets from operating. Representative Mike Levin demanded answers, transparency, and oversight on Saturday, stating that prediction markets cannot become vehicles for profiting from advance knowledge of military operations.

Levin revealed that both the DOJ and CFTC had launched active investigations into Polymarket but dropped them after Trump assumed office. The representative pointed out that Donald Trump Jr. serves on Polymarket’s advisory board, raising questions about potential conflicts of interest. The Commodity Futures Trading Commission published Press Release 9185-26 on February 25, warning that insider trading on event contracts violates US law. This advisory appeared just three days before the February 28 strikes that generated massive payouts for certain traders.

States that have regulated sports gambling platforms in recent years now argue that prediction markets should follow these same rules and restrictions. Trump’s former acting Chief of Staff Mick Mulvaney recently created Gambling Is Not Investing, an organisation focused on restricting prediction markets, particularly those offering sports contracts. Polymarket operates its main trading platform offshore and prohibits American users from accessing the site, allowing the company to avoid CFTC regulations. Online guides explain how US residents can circumvent these restrictions using a VPN, which raises serious questions about the effectiveness of enforcement measures. The company remained silent when asked for comment about these practices and the recent trading activity.

European regulators increased pressure on February 17 when the Netherlands Gambling Authority demanded that Polymarket cease operations within the country immediately. The authority threatened to impose weekly fines of €420,000, potentially rising to €840,000, if the platform fails to comply with the order.