Sen. Chris Murphy (D-Conn.) announced he is drafting legislation to ban prediction market trades related to government actions after traders wagered over $55 million on whether Iran’s Supreme Leader would be removed from power, a contract widely thought to be a proxy for his death.

“I want to talk about a dystopian world we are entering, where every moment, event, and crisis just become commodities,” Murphy posted on X on Wednesday.

He later added, “The Iran War is fueling a new kind of corruption: White House officials secretly profiting off war. It’s disgusting. We need to ban it.”

CFTC Response

CFTC Chairman Michael Selig used a Milken Institute stage Tuesday to deliver the agency’s clearest regulatory roadmap yet.

“We are going out with guidance in the very near future, so please stay tuned,” Selig said.

Selig did not address death or war-related contracts directly.

The announcement follows one of the most controversial weeks in prediction market history.

Kalshi’s “Ali Khamenei out as Supreme Leader?” contract, widely seen as a proxy for his death, generated over $50 million in volume before the Iranian leader was killed in U.S.-Israeli strikes on Feb. 28.

Kalshi invoked a death carveout, settling at the last traded price rather than paying out full $1 contracts. The platform reimbursed all fees, but traders were furious after Kalshi admitted its settlement language was “grammatically ambiguous.”

Polymarket, meanwhile, quietly deleted a “Nuclear weapon detonation by…?” contract on Wednesday after it drew nearly $850,000 in volume and widespread backlash.

The platform had posted a 22% probability of a nuclear detonation by year-end on X before deleting the market.

Adding to the regulatory pressure, six Democratic senators led by Adam Schiff (D-CA) separately sent a letter to Selig demanding the agency ban contracts that resolve on or correlate with death, setting a March 9 deadline.

Why It Matters For Traders

Critics like Murphy say these markets let people profit from war and death. Supporters argue they provide valuable real-time information about geopolitical risk that traditional forecasting can’t match.

Either way, the money is real.

Robinhood Markets Inc (NASDAQ:HOOD) CEO Vlad Tenev called prediction markets the fastest-growing business in company history, with over 12 billion event contracts traded in 2025 and a revenue run rate north of $300 million.

DraftKings Inc (NASDAQ:DKNG) has lost over 60% from its all-time high as prediction markets eat into sports betting share. CEO Jason Robins called the category “the most exciting new growth opportunity” since legalized sports betting began in 2018 and projected it could become a $10 billion annual revenue market.

Flutter Entertainment plc (NYSE:FLUT) has shed over half its value in the past year under the same pressure.

Both are scrambling to launch their own prediction products.

If Selig draws hard lines on death and war contracts, the most viral market types disappear. If he doesn’t, Murphy’s legislation may try to do it for him.

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