Prof G Markets: "$500M Bet On The Iran Strike — Before It Happened"

Date: March 5, 2026
Host: Ed Elson
Guests: Jonathan Cohen (policy leader, author), Dan Primack (Axios business editor)

Episode Overview

This episode delves into the explosive revelation that more than $500 million was traded on prediction markets prior to the recent US strikes on Iran—raising major questions about the ethics, legalities, and future of betting on war and death. Ed Elson and experts discuss the blurred lines between investing, gambling, and speculation, and how the financial and tech sectors are transforming in response to a world dominated by conflict. The latter half explores the meteoric rise of defense tech startups like Anduril, as Silicon Valley’s investment focus shifts toward military technology in the wake of the Iran strikes.

Key Discussion Points

1. Prediction Markets and the “Gambling on War” Phenomenon

Segment Start: 02:36

• Revelation:
  Over $500 million traded on prediction markets regarding the timing and outcome of the US strikes on Iran—even before the news broke publicly. Polymarket alone saw $529 million in action; Kalshi’s market on Iranian leadership ouster approached $55 million before being halted following Ayatollah Khamenei’s death.
• Ethical and Legal Concerns:
  • Kalshi's Policy: Markets directly tied to death are not permitted; after Khamenei’s death, the “out” market was halted.
  • Legislative Response: Sen. Chris Murphy is pushing for legislation to prevent individuals with connections to government from profiting off war outcomes.

Notable quote:

“When the Supreme Court legalized sports gambling in 2018... we did not anticipate what we now have, which is the gamblification of everything.”
— Jonathan Cohen [04:47]

Where to Draw the Line?

• Distinction:
  Kalshi positions itself as an investment platform, emphasizing “wisdom of the crowds” rather than pure gambling. But it avoids death markets due to both legal and reputational factors.
• User Frustration:
  Many traders misunderstood what outcomes were actually tradable—raising the need for clearer rules and fine print.

Memorable moment:

“Khomeini out as Iran leader, and out apparently did not include death, which is why all these retail traders are super upset... fundamentally it boils down to a lot of people not reading the fine print.”
— Jonathan Cohen [05:58]

2. Gambling vs. Investing vs. Trading: Where’s the Line?

Segment Start: 06:55

• Jonathan Cohen’s Distinction:
  Investing should offer some “secondary utility” beyond speculation—e.g., buying into Apple helps the company grow; betting on sports or geopolitical outcomes is merely entertainment or profit-seeking.
• Social Utility:
  Elson asks if prediction markets about wars or catastrophes could have planning value; Cohen warns of dangerous influence/manipulation of news and events.

Notable quote:

“All it takes is, what, $15,000 to sort of drive up the spike in the market... a potential actual ouster... just with $15,000 on Polymarket. As whatever benefit we get on a social utility standpoint, I could see the exact opposite happening.”
— Jonathan Cohen [09:03]

• Liability Concerns:
  Elson posits that platforms could be morally (if not legally) culpable if markets incentivize real-world harm.
  Cohen uses a tongue-in-cheek analogy about betting on Elson being punched and then making it happen to win a bet, illustrating the risk of manipulation.

Memorable moment:

“It is rife for manipulation and ripe for getting people to do things in the real world that they might not otherwise have done because they can make money off of it.”
— Jonathan Cohen [10:46]

3. Nuclear Detonation Markets & Public Backlash

Segment Start: 11:32

• Polymarket Reaction:
  Polymarket offered a market on the probability of a nuclear detonation after Iran strikes, with the odds spiking to 24%; facing backlash, the market was pulled.
• Market Positioning:
  Polymarket remains unavailable in the US but is strategizing its reentry, possibly by being more sensitive to public and political reaction.

Notable quote:

“Let’s hope that’s the one market that had no insiders. Let’s hope that was purely speculative.”
— Jonathan Cohen [12:23]

4. Regulatory Future of Prediction Markets

Segment Start: 13:02

• Ongoing Lawsuits:
  Multiple states are suing Kalshi, mainly over sports contracts (which make up 90% of its volume).
• Cohen’s Prediction:
  The most likely outcome is that the Supreme Court will ultimately decide the fate of these markets due to accumulation of state-level suits. The executive branch’s regulatory agencies (like the CFTC) may play a limited direct role.

Notable quote:

“I think the most realistic regulatory approach will actually just come from the judicial branch rather than through traditional regulation.”
— Jonathan Cohen [13:20]

5. Venture Capital Floods Defense Tech After Iran Strikes

Segment Start: 17:51

• Startup Boom:
  Defense tech companies—especially Anduril—are raising record amounts ($4B at a $60B valuation for Anduril), dwarfing prior years and matching or exceeding legacy defense primes’ public valuations.
• Technological Shifts:
  The new paradigm is autonomy: AI-powered and/or remotely operated weapons and defense platforms.

Notable quote:

“The real kind of nub of Anduril is autonomy... Think of a lot of self-driving right now, which is self-driving, but you actually have somebody sitting... who can hit the brake if need be. That’s really the guts of it.”
— Dan Primack [19:48]

• Drivers of Growth:
  • Major uptick in global and US defense spending after recent conflicts.
  • Venture capital’s growing comfort with military contracts (“concentration risk” with government customers persists, but the market opportunity is just too big to ignore).

Notable quote:

“We are in more theaters than the US has been in for a long time.”
— Dan Primack [20:33]

• Silicon Valley’s Changing Stance:
  Traditional reluctance from VCs about defense is waning as technology stack becomes the primary value driver and demand soars.

6. The Era of “Defense as the New AI”

Segment Start: 25:58 (Host’s closing remarks)

• Cultural Shift:
  Elson observes that war dominates all discussions—news, social media, investment meetings—and is shaping the lens through which companies and VCs view opportunity.
• AI’s New Role:
  Companies like OpenAI and Anthropic, once viewed as pure tech, are pivoting into defense, showing how swiftly war “recasts” a sector’s significance.
• Portfolio Shifts:
  Investors will increasingly ask about defense applications in nearly every sector; the defense “angle” will soon be as important as the “AI” angle was in recent years.

Notable quote:

“Defense is about to be the new AI. Not just in the sense that it’s going to receive a lot more investment, which it will, but also in the sense that it will receive a lot more hype.”
— Ed Elson [25:58]

Notable Quotes & Timestamps

• “We did not anticipate what we now have, which is basically the Gamblification of everything.” — Jonathan Cohen [04:47]
• “All it takes is... $15,000 to sort of drive up the spike in the market... a potential actual ouster just with $15,000 on Polymarket.” — Jonathan Cohen [09:03]
• “It is rife for manipulation and ripe for getting people to do things in the real world that they might not otherwise have done because they can make money off of it.” — Jonathan Cohen [10:46]
• “Let’s hope that’s the one market that had no insiders.” — Jonathan Cohen [12:23]
• “The real kind of nub of Anduril is autonomy... Think of a lot of self-driving right now, which is self-driving, but you actually have somebody sitting... who can hit the brake if need be.” — Dan Primack [19:48]
• “We are in more theaters than the US has been in for a long time.” — Dan Primack [20:33]
• “Defense is about to be the new AI... it will receive a lot more hype.” — Ed Elson [25:58]

Key Timestamps

• [02:36] — Breaking: $500M in pre-strike bets; overview of Iran market trades
• [04:47] — Gamblification of everything; ethical questions
• [09:03] — Job of prediction markets; dangers of manipulation
• [10:46] — Real-world incentives for harm and manipulation
• [12:23] — Markets trading on nukes; Polymarket backlash
• [13:20] — Regulatory outlook; Supreme Court’s likely role
• [17:51] — Explosion in defense tech investment; Anduril overview
• [19:48] — How Anduril’s autonomy works
• [21:59] — Silicon Valley’s cultural and ethical shift towards defense
• [23:56] — Is funding-from-VCs a concern?
• [25:58] — Host’s reflection: war’s impact on investment focus

Summary Takeaways

• Prediction markets are now major players in news cycles, influencing perception, political cycles, and possibly real-world events—leading to urgent debates about regulation, legality, and ethics.
• The arm’s-length distinction between investing, trading, and gambling is thinning; especially so when financial instruments are tied to global events and human life.
• Defense tech is now the darling of both VC funding and public investment in a world where conflict has become omnipresent. Autonomy and AI integration are positioned as the future of both warfare and investment.
• Expect “defense” to be the new “AI” in pitch decks and VC memos. That will deeply shape capital flows, founder incentives, and the very identity of the tech sector for the foreseeable future.

This episode is a must-listen for anyone interested in the intersection of markets, geopolitics, technology, and the rapidly shifting ethical terrain of investing in an age of constant conflict.