Crack down on prediction betting

It's inappropriate, unseemly and immoral to bet on when a person will die. Whether or not you believe in bad karma, it's surely an unsavory way to win money.

All-the-rage prediction markets take the posture that they do not allow such bets. One of the biggest, Kalshi, denied tens of millions of dollars in payouts after Iran's Ayatollah Ali Khamenei was assassinated, based on the prediction that Khamenei would be "out as supreme leader" by March or April. The company said it bars transactions "directly tied to death."

Morality is the worst context to assess these troubling marketplaces forecasting the future. But the clear and more specific threat of corruption looming with the kind of betting now occurring is the potential for abuse of classified or strategic government information. In recent days, the betting platform Polymarket accepted wagers on when U.S. airmen shot down in Iran might be rescued, then shut down the bets after an outcry.

After the Iran war began it emerged that an account called "Magamyman" placed an $87,000 bet on the United States attacking that country by Feb. 28 about 71 minutes before the news of it broke. Odds had been set at 17%. According to a blockchain analysis, the bettor made more than $500,000. The same account also had a timely bet on the demise of Khamenei.

The electronic prediction industry is so new that its regulation is uncertain. What is clear is that the odds in these casinos are being shaped by insiders — corporate, governmental, sports or political — who are monetizing their exclusive information. Unlike stock and other established markets that have mandatory disclosure and heavy monitoring of trades, prediction markets are the Wild West. 

This type of online gambling has popped up alongside legalized sports betting. The New York State Gaming Commission is battling with Kalshi in federal court over jurisdiction on its sports betting offers. But this week a federal appeals court in New Jersey found that the feds have exclusive jurisdiction over prediction markets, specifically the Commodity Futures Trading Commission.

While the federal-state skirmishes play out, concern grows for the most blatant kind of high-level corruption — and so does the need to crack down and prevent it. If the states legally cannot do the job, the federal government had better get in gear or a huge and avoidable scandal seems inevitable.

CFTC Chairman Michael Selig, a Trump appointee, promotes the prediction markets. The president's son Donald Trump Jr. was named a "strategic advisor" to Kalshi last year. He was also announced as a partner in the venture firm 1789 Capital — which last year invested in Polymarket, billed as Kalshi's biggest rival. 

Bills in the Senate and House would sensibly ban all wagering on government actions, terrorism, war, assassination and "events where an individual knows or controls the outcome." If Trump's CFTC shows no concern about new threats of insider trading, Congress needs to crack down on this disgraceful commerce.