Democrats Introduce Bill to Ban Prediction Market Contracts on War and Death

U.S. lawmakers Mike Levin and Adam Schiff have introduced the DEATH BETS Act, a new piece of legislation aimed at explicitly prohibiting prediction market contracts related to war, death, assassination, and terrorism. The bill seeks to amend the Commodity Exchange Act, removing the Commodity Futures Trading Commission's (CFTC) discretion in allowing such contracts and codifying a ban regardless of agency leadership.

Regulatory Expansion and Legislative Action

The introduction of the DEATH BETS Act coincides with the CFTC's announcement of plans to expand its regulatory framework for prediction markets. CFTC Chairman Michael Selig stated that the agency is actively working on guidance for event contracts and will initiate a rulemaking process to gather public input. Selig emphasized that the U.S. is the "crypto capital of the world" and that the CFTC will no longer passively observe the development of these markets within its purview, noting that prediction markets are now perceived as more accurate than political polls.

Concerns Over National Security and Exploitation

Lawmakers have voiced significant concerns that prediction markets tied to geopolitical events and individual fates pose serious national security risks. They argue that such contracts can incentivize violence, foster geopolitical conflicts, and create opportunities for insiders to profit from nonpublic information. Rep. Levin highlighted that over half a billion dollars was wagered on the timing of U.S. military strikes on Iran alone, deeming it unacceptable and stating the legislation aims to halt such activities.

Previous Warnings and Market Controversies

This legislative push follows a letter spearheaded by Sen. Schiff and co-signed by several other senators, urging the CFTC to reiterate its prohibition on contracts resolving upon or closely correlating to an individual's death. The senators cited examples of controversial Polymarket contracts, including one on the potential explosion of the Artemis II spacecraft, the removal of Venezuela's Nicolás Maduro from power (which reportedly earned one trader over $400,000), and the capture of the Ukrainian town of Myr by Russia, where bettors saw returns up to 33,000%.

In recent weeks, Polymarket voluntarily removed a nuclear detonation market that had attracted over $838,000 in volume following public backlash. Additionally, prediction market Kalshi is currently facing a class-action lawsuit concerning its handling of a market on the departure of Iran's Ayatollah Ali Khamenei, with plaintiffs alleging the platform improperly applied a "death carveout" clause, preventing full payouts after his death.