Suspected Insider Trading on War-Based Markets Isn’t New – It Happened Before 9/11, Too
Polymarket is taking heat after users profited from the attack on Iran; but this is just the latest example of traders taking advantage of potential inside information on calamitous events.
Amid evidence of suspicious, well-timed bets ahead of the US and Israel’s military strike on Iran, a 25-year-old story has resurfaced, reminding us that insider trading on war-related outcomes is not necessarily new.
In a piece dated Sept. 19, 2001 (h/t @quantwolfline), eight days after the worst terrorist attack in US history, CBS News reported that an inordinate number of trades betting against American Airlines and United Airlines stock were made just before Al-Qaeda’s act of war.
Traders buying American ‘put’ options profited over $5 million when the company’s stock price dropped 39% after the attacks.
From Sharyl Attkisson’s report on 60 Minutes:
The trades [on Sept. 10] are called ‘puts’ and they involved at least 450,000 shares of American. But what raised the red flag is more than 80 percent of the orders were ‘puts’, far outnumbering ‘call’ options, those betting the stock would rise. …
“The same thing happened with United Airlines on the Chicago Board Options Exchange four days before the attack. An extremely unbalanced number of trades betting United’s stock price would fall — also transformed into huge profits when it did after the hijackings.”
On Sept. 11, four commercial flights were hijacked. American Airlines Flight 11 and United Airlines Flight 175 struck the World Trade Center. AA Flight 77 struck the Pentagon. United Airlines Flight 93 crashed in Pennsylvania as passengers and crew fought the terrorists.
While the trades appeared anomalous, the 9/11 Commission found no conclusive evidence of insider trading relating to these trades, some of which were later chalked up to hedging strategies (sound familiar?).
Well-Timed Trades on Attacks on Iran
A multitude of problems arose around prediction markets as the US and Israel unleashed an assault on Iran over the weekend, suspected insider trading among them.
Data uncovered by blockchain analytics firm BubbleMaps shows that six Polymarket users profited $1.2 million with remarkably well-timed bets that the US would strike Iran on Feb. 28. Most of the accounts were funded less than 24 hours before the attacks.
One account, monikered “Magamyman”, placed its first trade 71 minutes before news of the strikes broke. At nearly 17% odds, the trader won $515,000 on an $87,000 investment. Magamyman’s profits on trades based on the US attacks totaled more than $700,000.
Trading volume on contracts based on the timing of the attacks (“US strikes Iran by…?”) reached $529 million on Polymarket, and a market asking “Khamenei out as Supreme Leader of Iran by March 31, 2026” saw over $62 million in trades.
This isn’t the first incident of Polymarket users profiting on suspected inside information about a US military action. Earlier this year, a trader turned a $32,000 bet on Venezuela President Nicolas Maduro being removed from power into more than $400,000.
Insider Trading and Prediction Markets
Insider trading is one of the myriad reasons prediction markets are under such heavy scrutiny (another, related to the attack on Iran, Kalshi’s scrambling to defend its “no trades based on death” policy as it attempts to settle the market on whether Khamenei would be removed from power).
Insiders, though, will continue to find ways to profit, whether prediction markets exist and whether they offer markets based on war, terrorism, or other calamitous events.
Of course, when the insidiousness of insider trading occurs around devastation, scrutiny intensifies. (In a more innocuous example — at least to those of us not on the wrong side of the trades — a Polymarket trader reportedly made nearly $1 million by correctly predicting the outcome of several terms in 2025 Google search rankings).
Some other examples from recent history of unusual trading on catastrophe:
- Before Russia’s February 2022 invasion of Ukraine, there were reports of abnormal trading on oil and gas futures, defense contractors, and Russian ETFs.
- US Sens. Richard Burr and Kelly Loeffler were investigated by the DOJ for selling an atypical amount of stock before the market crashed in 2020 at the onset of the COVID outbreak.
Kalshi’s rules explicitly prohibit insider trading; Polymarket’s do not. Comments made by Polymarket CEO Shayne Coplan, in fact, have been interpreted by some as “insider trading is a feature not a bug.”
As Polymarket readies its full US launch (the Iran markets were available only on the international version of the platform), we’re wondering if he’s rethinking that.
Whether he is or isn’t, insider trading will persist, and the unscrupulous will find ways to profit. If you’re trading on prediction markets, especially, it’s best to be wary of this. If insiders are winning, someone else is losing.
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