Polymarket traders use AI-generated fake war imagery to manipulate markets
Traders on Polymarket and Kalshi reportedly used AI-generated fake videos and images of Iranian military targets to manipulate market prices and earn substantial profits during escalating U.S.-Israel military strikes. Israeli police investigated the suspicious trading patterns, which involved accounts created shortly before strikes and bets placed hours before attacks occurred.
What happened
Traders on Polymarket and Kalshi used AI-generated fake videos and images depicting military strikes against Iran to manipulate market sentiment and move prices. The fake content included images of 'devastated' military bases and fake drone footage.
An account named 'Magamyman' earned approximately USD 430,000 by predicting U.S. strikes on Iran would occur on February 28. Analytics firm Bubblemaps identified at least six newly created accounts that earned approximately $1 million by correctly betting the US would attack Iran by February 28, with some bets placed hours before the strikes began.
Reported impact
Hundreds of millions of dollars were wagered on Iran war scenarios, with significant financial losses for many traders but outsized profits for a small number of accounts. The incident raised concerns about financial incentives to influence market probabilities through deceptive media.
Exposure to AI-generated war content risks numbing viewers, confusing facts about military events, and undermining trust in authentic journalism. For OSINT researchers, the proliferation of AI-generated 'war slop' threatens the credibility of legitimate researchers using satellite data.
Index analysis
Polymarket's war markets create strong financial incentives to manipulate perceived probabilities of events, while AI tools enable the generation of convincing fake evidence that can influence public sentiment and prices. Platforms provide little transparency about suspicious trading patterns, moderation of deceptive content, or safeguards against manipulated media.
Under US commodity trading laws, making trades based on death and war are technically illegal as they create financial rewards for violence and geopolitical instability. However, traders accessed largely unregulated international versions of Polymarket through virtual private networks.
Governance controls
Israeli police opened an investigation into potential insider trading or coordinated manipulation following the identification of suspicious trading patterns. U.S. and Israeli lawmakers are pushing for strict regulations or outright bans on 'death markets,' viewing them as national security risks that could incentivise violence.
Classification
Sources and evidence
This record was researched and written by the Index, based on the following original reporting.