Is anyone gonna do anything about these Iran War trades?

0:01Darien Woods:NPR.

0:11Carden Wyckoff:This is The Indicator from Planet Money. I'm Waylon Wong.

0:14Darien Woods:And I'm Ricky Mulvey. The Iran war has led to the deaths of thousands of people, economic instability around the globe, and billions of dollars in U.S. military spending. But financial markets march on. And now, traders aren't just watching price charts and economic data, they're staying tuned to President Trump's Truth Social posts.

0:32Carden Wyckoff:They're seeing if the war seems to be heating up or cooling down. If it's heating up, oil prices are up. If it's cooling down, the S &P 500 has a good day.

0:43Darien Woods:But some traders may know what's coming before the rest of the market does.

0:47Carden Wyckoff:Case in point, in late March, President Trump announced on Truth Social that he would postpone strikes on Iran. Right before that announcement, at least one trader bet big that oil prices would fall and the S &P 500 would rise.

1:01Darien Woods:Doesn't mean it couldn't be completely coincidence. Could be. But it does strike me as a bit fishy. Today on The Indicator, we're looking into suspicious trades. How did a financial tool that farmers use transform into speculative bets on Iran getting a nuclear weapon? And are regulators paying attention? That's after the break.

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2:58Carden Wyckoff:Traders are paying more attention to politics these days. Michael Coe is a trader now with Tidal Financial Group.

3:05Darien Woods:I actually signed up for a true social account just to try to keep track of it. But I will admit that I have not been diligent about logging into it. It's just one of these things that that's not the way we're used to operating. Two trades that recently caught Michael's attention were in the futures market.

3:21Carden Wyckoff:And just a quick explainer here, the futures market lets a seller lock in a price with a buyer ahead of time.

3:27Darien Woods:Farmers and ranchers historically used these contracts to, say, guarantee a price for their corn harvest right after they planted the seeds.

3:35Carden Wyckoff:They've become popular bets in financial markets. They're essentially betting on price changes.

3:41Darien Woods:And it's in this market that our suspicious trades took place.

3:44Carden Wyckoff:The first was a$1.5 billion trade betting that the price of the S &P 500 would quickly rise. The other was a few hundred million dollar bet that the price of oil would fall. These bets happened very close together early in the morning of March 23rd and were relatively huge compared to other trades that morning.

4:05Darien Woods:A few minutes after the trades went through, President Trump posted on Truth Social, gotta say it in all caps,

4:17Carden Wyckoff:Thanks for your attention to this matter, Ricky. Okay, so the S &P 500 rose and the price of oil fell on the news. Iranian state media later disputed that these talks happened. However, Michael says the trades had already paid off.

4:32Darien Woods:Those trades were up 50 million bucks within very short period of time. A few elements were fishy to Michael. First, the size of the trades. Second, they happened one right after the other. And third was the timing before Trump's post. What was extraordinary about that one was that the catalyst wasn't specifically on the calendar, so to speak. Right?

4:54Carden Wyckoff:In other words, Trump's ceasefire announcement was unexpected. And these large bets appeared to come out of nowhere.

5:02Darien Woods:So, was anyone paying attention? We are the cop on the beat.

5:06Carden Wyckoff:Kristen Johnson is a past commissioner with the Commodity Futures Trading Commission, or the CFTC.

5:12Darien Woods:Our job at the CFTC is to ensure the integrity and stability of markets. She was a commissioner of the CFTC from 2022 to 2025 under Presidents Biden and Trump. The way our markets work, algorithms and essentially bots, are regularly gathering data and mimicking or mirroring trades that happen in the markets.

5:33Carden Wyckoff:Traders sometimes follow the herd. One increase in bets can lead to more traders taking the exact same position. Kristen says maybe these trades are the result of a snowball.

5:45Darien Woods:However, she says that they deserve a second look. The challenge, however, is when we see activity that appears to reflect that someone gained access to potentially confidential information or classified information in the context of a military campaign and use that information to profit personally, red flags fly almost immediately.

6:07Carden Wyckoff:And there are lots of questions that we would want to have answered. Traders on the other side of the bet that lost money may also have a beef. They may want to know who made the trade and did they have information that gave them an unfair advantage.

6:20Darien Woods:But Kristen says it is fairly easy for the commission to find out which accounts made these specific trades if it wants to. Simply by virtue of an inquiry, a letter or email request to the exchange, the CFTC would be provided quite quickly with information regarding the accounts where trading activity took place.

6:38Carden Wyckoff:That's because these traditional futures exchanges have something called know your customer rules. See, when you open an account to trade futures or if you even open a retirement account, your broker needs to know who you are. They want to know if you're qualified to trade risky bets, and they want to make sure you're not doing anything illegal.

6:57Darien Woods:But today, it's tougher for the CFTC to take on these investigations. One fairly significant challenge that arose as I was leaving the commission was sort of a move to reduce the size of the Division of Enforcement and significantly restructure that division.

7:13Carden Wyckoff:Cuts were made under Trump's Department of Government Efficiency, a.k.a. DOGE. So the CFTC now has fewer cops on the beat. That said, the agency is investigating the oil trade. We reached out to the CFTC for more details, but it declined to comment.

7:29Darien Woods:Meanwhile, they have more work to do. There's a whole different stripe of futures contracts the CFTC needs to pay attention to. Prediction markets. We're talking Kalshi and Polymarket. Now, Kalshi is fully regulated by the CFTC because it went through the legal process to run a futures market in the United States.

7:47Carden Wyckoff:Polymarket isn't as clear-cut. It has two sides of its business. One is looking to be fully regulated and legal in the U.S., just like Kalshi. The other side is the Wild West. It's an unregulated international platform.

8:03Darien Woods:We are in such a beginning developmental stage of these. We've seen the tip of the iceberg. That's Steven Peepgrass. He's a partner at Troutman Pepper Lock, a big law firm.

8:13Carden Wyckoff:Polymarket's offshore business uses cryptocurrency.

8:17Darien Woods:Figuring out who it was who made those trades can be very difficult, if not impossible. Polymarket International checks your location, but not your ID at the door. This makes it harder for regulators to see if insider trading is going on. And some of these Wild West markets have real national security implications. On the international version of Polymarket, you can bet on Iran having a nuclear weapon by the end of next year, or if Karg Island will be struck over the next couple of weeks. The concern is if someone either has that knowledge and tips off the world to it, that has national security implications.

8:52Darien Woods:If someone has a lot of money riding on it and has the ability to influence those actions, that's a huge problem as well.

8:59Carden Wyckoff:Last month, the White House staff received an email warning them not to use insider information to make bets on prediction markets.

9:07Darien Woods:An anonymous account on Polymarket called MagaMyMan has already made hundreds of thousands of dollars. The account correctly bet on when the U.S. would strike Iran. Adversaries may look at accounts like this to see what the U.S. military could do next, even though this account has not been 100 percent accurate.

9:25Carden Wyckoff:Now, finding out if this trader is an insider or just a lucky duck is difficult. Regulating prediction markets is a new frontier.