Welcome to Monday’s edition of Washington Secrets. We take a look at the prediction market rivalry with profound implications for regulators … and why you may have seen it play out on bus stops, plus what definitely NOT to wear at next week’s royal garden party.
Polymarket has 245 active markets on the war in Iran, allowing users to make money by predicting whether there will be another change of leader in Tehran or whether the US will invade.
Kalshi has six markets. Think: Will Donald Trump visit this year? Or will the U.S. reopen its embassy?
One platform is offshore, largely unregulated, and acting like a real-time war casino. The other spent five years building federal approval and explicitly bans markets involving death or destruction.
Congress is coming for both anyway.
Earlier this month, members of Congress wrote to the Commodity Futures Trading Commission to question whether it had sufficient control over the growing industry.
Their letter began: “We write to express concern that prediction markets have come to resemble an unregulated ‘Wild West.’”
The result is a huge amount of heat and not much light as Washington and state capitals weigh how best to regulate this new form of speculating.
And you can almost hear the gnashing of teeth at Kalshi. Its chief executive won’t even say the name of “Polymarket.” His spokeswoman is rather more diplomatic.
“There is conflation and not all prediction markets are the same,” Elisabeth Diana, head of communications at Kalshi, told Secrets. “They’re not a monolith, and there are very important distinctions between the two.”
There is certainly a touch of the Wild West in the public imagination, with headlines about the sort of insider trading that would have made 1980s Wall Street blush.
CNN reported that one trader had made almost $1 million since 2024 with dozens of well-timed deals predicting U.S. and Israeli military actions against Iran.
A string of newly established accounts made hundreds of thousands of dollars when the ceasefire was announced two weeks ago.
And a user made more than $550,000 when Iran’s supreme leader, Ayatollah Ali Khamenei, was killed.
But Kalshi folks are keen to point out that those are not happening on its platform. It has reported two incidents and suspended the users involved.
An employee of YouTuber MrBeast was also fined after using nonpublic information to profit from nonpublic information about upcoming videos. And Kalshi suspended a former candidate for California governor who bought contracts tied to his own candidacy.
Yet legal challenges are mounting. Washington State recently sued the company for “operating and advertising an online platform where users can bet on sports, elections, and other events.” There is a similar case in Arizona (although it was recently blocked by a federal judge), and Nevada is locked in a legal battle about whether the company is essentially a sportsbook and should heed its state gambling regulations.
Meanwhile, D.C. is getting in on the act. A bill before the Senate, the Prediction Markets are Gambling Act, would prohibit any CFTC-registered market from listing a contract that resembles a sports bet. Its sponsors say the markets are not properly regulated and essentially exploit a loophole.
A LOOK AT THE BILLS TO REIN IN PREDICTION MARKETS
Diana said it was wrong to lump all prediction markets together as part of the Wild West.
“Being regulated by the CFTC means we ban insider trading. It is not allowed,” she said.
“We support Congress and regulators taking action to police instead of trading, because we already do that, and we want to keep prediction markets onshore and under federal regulation.”
Both big players have stepped up lobbying efforts. Polymarket brought its “Situation Room” pop-up bar to Washington.
And two weeks ago, D.C. residents (and its lawmakers) were blitzed with adverts making the point that they were a very different proposition.
In newspapers and bus shelters, the green ads said things like: “Kalshi Rule #2: We don’t do death markets. Or “Kalshi Rule #4: We operate under U.S. law.”
In an age of VPNs allowing users to hide their location and use offshore platforms, the Coalition for Prediction Markets (which includes Kalshi, Robinhood Coinbase, Robinhood, Underdog, and Crypto.com) said it was vital to draw a “bright line” between U.S.-based, federally-regulated companies and the unregulated platforms where “the scandals were happening.”
“It’s critical to grow the industry right here in America, where there are strict Know Your Customer and market manipulation guardrails so licensed platforms know who’s trading and can enforce the rules,” it said.
Hats off for the King
British diplomats are just seven days away from the arrival of King Charles III, and the high point of their year, if not their entire diplomatic careers. You can imagine the stress involved in making sure such a high-profile event goes smoothly. And that’s before you even factor in the wild card that is President Donald Trump and his recent tirades against the King’s prime minister, Sir Keir Starmer.
Well, Secrets has more bad news ahead of the visit.
How things have deteriorated at the British ambassador’s residence in the past year. No, not the embarrassing firing of Lord Peter Mandelson last year for his close relationship with pedophile Jeffrey Epstein.
An invitation arrives at Secrets HQ for a garden party to welcome the King. It comes with the following dress code: “Lounge suits. Day Dress. Hats not encouraged.”
Hats not encouraged? What is the point of a garden party if not to show off some headgear?
This would never have happened under Mandelson’s predecessor, Dame Karen Pierce. She famously wore a feather boa at a United Nations Security Council meeting. And her wardrobe includes tiaras, fascinators, and at least one cowboy hat. She would preside over garden parties resplendent in the sort of vast bonnet that kept not only the sun from her face but (Secrets suspects) also kept selfie hunters from getting too close.
She would never have signed off on this dress code.
Quote of the day
Are we heading towards a new round of talks? Or is the Iran ceasefire heading for the rocks two weeks after it was agreed?
Are American negotiators en route to Islamabad? Will Iran turn up?
Trust is a huge issue in any set of negotiations. And the Iranians have a lot to worry about. In 2018, the first Trump administration unilaterally pulled out of the 2015 Joint Comprehensive Plan of Action, even though most observers said Tehran was complying with the terms of the deal to prevent it from getting nukes. Eight weeks ago, Trump began bombing Iran despite negotiations, which European allies said were making progress.
The result is the not entirely unreasonable view of Iran’s Deputy Foreign Minister, Saeed Khatibzadeh. When asked whether his side was ready for talks during meetings in Turkey at the weekend, he said:
“The American side tweets a lot, talks a lot. Sometimes confusing, sometimes, you know, contradictory.”
Lunchtime reading
The FBI director is MIA: You’ve probably read it by now, but this is still pretty extraordinary. Plus, it’s getting extra legs today with news that FBI Director Kash Patel is suing The Atlantic for $250 million. Sarah Fitzpatrick, the reporter who wrote the story, is also named in the suit.
How the Right squandered Charlie Kirk’s death: A succession battle and a slew of conspiracy theories have obscured the mission facing conservatives. Is it to engage more earnestly with liberals or treat them openly as enemies?
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