But critics say they are sports betting and gambling operations trying to dress up as financial exchanges in a bid to avoid stricter rules and taxes faced by traditional gaming firms, which are regulated by the states.

Disagreement over who should be policing the apps has sparked dozens of legal battles across the US, as states start to assert their right to regulate the companies like other gaming firms, rather than leave oversight up to the CFTC.

Even some Republicans have voiced concerns, as traditional gaming firms have also stepped up their lobbying, enlisting a savvy former Trump official, Mick Mulvaney, to plead their case in Washington.

“Nobody is saying that gambling shouldn’t be allowed,” says Ben Schiffrin, director of securities policy at Better Markets, which advocates for financial reforms. “What the states are saying and other advocates are saying is things that are gambling should be regulated as gambling.”

Suspiciously timed bets related to military operations involving Israel, Venezuela and Iran have added fodder to those calls.

In recent weeks, Democrats have introduced legislation to bar federal officials from trading event contracts, pointing to incidents such as when a gambler new to Polymarket made nearly half a million dollars on the capture of Venezuela’s president just before it was officially announced.

They have also issued alerts to consumers about the risks of insider trading and written to the administration urging it to more clearly enforce the rules against wagering on war.

But the odds of a crackdown remain long.

Though the Biden administration had taken a hard line on the sector, proposing to ban sports and politics-related event contracts, that regulatory drive stalled after a court defeat and the 2024 election of Donald Trump, who came to power promising a lighter hand.

Last month, the CFTC said it would withdraw the proposed ban on sports and election related contracts.

It has also taken the side of prediction market firms in the legal fights they are facing in the states, which Michael Selig, Trump’s chairman of the Commodity Futures Trading Commission, condemned in a recent opinion piece as “overzealous”.

He argued that event contracts served “legitimate economic functions”, allowing businesses to hedge against risks triggered by events.

“It’s clear that Americans like the product and want to participate,” he said, while also emphasising that platforms must still follow rules.

As the pressure mounts, Polymarket has announced steps to more formally police suspicious activity, while Kalshi, which advertises its status as a “regulated exchange”, has become more vocal about what it is doing to combat insider trading.

It recently announced punishments in two cases of insider trading and disclosed that it had opened up 200 investigations over the last year.

The company also ultimately cancelled the $54m market around Khamenei’s ouster.

In  series of statements explaining the decision, the firm said it did not “list markets directly tied to death”, noting that its terms had included that carve-out.

It promised to make the terms more clear from the get-go, saying it had “learned a lot” from the incident.

But in an indication of growing pains, the decision still sparked outrage among users, including Stew, who said the firm had initially “buried” those rules and its explanation seemed disingenuous, given that there were “only a handful of realistic methods” for Khamenei to go.

Stew, who received a refund, said he wasn’t sure regulation was the answer, but he was sympathetic to the idea that the debate seemed to be stumbling around semantics.

“They call it contract trading, which I guess technically speaking, that’s what it is. But if we’re all being honest here, it’s still betting,” he said.