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Prediction market platforms Kalshi and Polymarket are pursuing valuations near $20 billion amid intensifying calls for federal regulation following allegations that traders profited from inside information on geopolitical events.
Senator Chris Murphy cited suspicious betting on Iranian strikes, while lawmakers debate whether the platforms pose national security risks and require stricter oversight.
The potential fundraising surge comes at a sensitive moment for the industry, as lawmakers push for tighter Prediction markets regulation following allegations that traders used inside information to place lucrative bets tied to geopolitical events.
Recent activity on prediction platforms has sparked concern among US policymakers, intensifying calls for stricter Prediction markets regulation.
Suspiciously timed wagers on platforms like Polymarket reportedly predicted the timing of US and Israeli strikes on Iran. Some traders appeared to profit shortly before explosions were reported in Tehran, raising the possibility that sensitive information may have leaked into trading activity.
Senator Chris Murphy was among the lawmakers raising alarms.
“Allowing people to profit from advanced knowledge of military action creates obvious risks,” Murphy said while discussing new proposals aimed at strengthening Prediction markets regulation.
Murphy alleged that several Polymarket accounts generated roughly $1 million by placing wagers hours before the strikes became public knowledge.
The episode has become a key example cited by policymakers advocating for clearer Prediction markets regulation to prevent potential insider trading or national security breaches.
Unlike many crypto-native platforms, Kalshi already operates within the US regulatory framework.
Founded in 2018 by Tarek Mansour and Luana Lopes Lara, the platform received approval from the Commodity Futures Trading Commission in 2020 to run an exchange for event-based contracts.
That regulatory backing has allowed Kalshi to offer markets tied to sports results, political outcomes, economic indicators and cultural events.
Despite that status, the ongoing Prediction markets regulation debate continues to affect Kalshi’s operations. Several US state regulators have challenged whether certain contracts resemble gambling rather than financial derivatives.
Still, Kalshi’s growth has been rapid. The company raised $1 billion in December at a valuation of around $11 billion and has since reportedly surpassed a $1 billion revenue run rate, with some estimates placing it closer to $1.5 billion.
Such expansion is one reason investors remain interested in funding the company despite increasing pressure for stronger Prediction markets regulation.
Meanwhile, Polymarket is preparing to re-enter the US market later this year with a regulated domestic version of its platform.
The blockchain-based exchange, founded by Shayne Coplan, currently restricts direct access for US users unless they rely on virtual private networks.
However, Coplan has emphasized that regulatory compliance is a priority as the company prepares for expansion.
“This approval allows us to operate in a way that reflects the maturity and transparency that the US regulatory framework demands,” Coplan said previously when discussing regulatory progress tied to the platform.
Polymarket was valued at approximately $9 billion last October after Intercontinental Exchange agreed to invest up to $2 billion in the company.
If ongoing fundraising succeeds, both Polymarket and Kalshi could reach $20 billion valuations an outcome that would dramatically raise the stakes of the Prediction markets regulation debate.
The push for stronger Prediction markets regulation has also been fueled by several controversial trades on Polymarket.
In one recent case, a group of crypto wallets reportedly earned more than $1.2 million by betting on an investigation tied to a decentralized finance platform shortly before a blockchain investigator published claims of insider trading.
Another incident saw a Polymarket trader generate about $400,000 after placing a large bet on the capture of Venezuelan President Nicolás Maduro shortly before the news became public.
These episodes have strengthened arguments that clearer Prediction markets regulation is needed to address the risk of traders exploiting confidential information.
Despite the controversy, prediction markets are experiencing explosive growth.
The platforms allow users to trade contracts representing the probability of real-world outcomes—from elections and sports to economic indicators and global conflicts.
Supporters argue that such markets aggregate collective knowledge and can provide surprisingly accurate forecasts.
“When thousands of people are willing to bet on what they think will happen, markets can produce powerful predictive signals,” analysts have noted when describing the industry’s appeal.
However, critics say the rapid expansion of the sector is happening faster than regulators can respond, leaving gaps in Prediction markets regulation.
Banking analysts have also warned that the gamified nature of these platforms could encourage risky financial behavior among retail traders.
The current moment may represent a turning point for Prediction markets regulation.
Federal regulators are already examining how event-based contracts should be classified, while lawmakers debate whether betting on sensitive geopolitical events should be restricted entirely.
At the same time, the industry’s rising valuations suggest that investors believe prediction markets will become a major part of the financial ecosystem.
For Kalshi and Polymarket, the challenge now lies in balancing rapid growth with regulatory compliance.
As the debate over Prediction markets regulation intensifies, the outcome could shape how billions of dollars in event-driven trading operates in the years ahead.
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