Kalshi CEO Tarek Mansour posted a video on Wednesday of six men decked out in business casual doing push-ups on the sidewalk. “This is how Kalshi Q1 board meeting ended,” he wrote on X. The board members are laughing and smiling in the video after their impromptu cardio session, and the mood is jubilant. The next day, it became clear that the team had ample reason to celebrate: Kalshi had just raised $1 billion at a $22 billion valuation, making the company worth on paper roughly double what it was only a few months ago.

The funding round represented a bright spot during one of the most turbulent weeks for the prediction market industry yet. In just the past five days, Nevada temporarily banned Kalshi by issuing a temporary restraining order and Arizona filed criminal charges accusing it of running an illegal gambling business; an Israeli reporter said that he received an avalanche of threats from Polymarket traders furious about how a story he wrote impacted their wagers; Polymarket scored a major deal with Major League Baseball, further entrenching itself in the world of professional sports; and US Senators introduced legislation to ban specific types of markets offered by the industry, including any involving “government actions, terrorism, war, assassination, and events where an individual knows or controls the outcome.” It is the latest in a series of bills intended to place guardrails around the prediction industry.

Senator Chris Murphy, a cosponsor of the bill and one of the industry’s most outspoken critics, said in an interview with WIRED that prediction markets are “a rigged and dangerous product,” and represent “a brand-new source of mind-bending corruption.”

"Kalshi already bans insider trading and markets directly tied to death and war,” says Kalshi spokesperson Elisabeth Diana. “As a US-based exchange, we support regulators and policymakers from both sides of the aisle in their efforts to keep these markets safe and responsible in America." Polymarket did not return requests for comment.

Existing law gives the Commodity Futures Trading Commission, the agency that oversees prediction markets, the authority to ban offerings related to assassination, war, terrorism, and other subjects deemed contrary to the public interest. Some prediction markets already stay away from these categories. But not all of their users understand where exactly the lines are drawn, which created a messy situation when some assumed that a market on the fate of Iran’s supreme leader would result in a payout if he “left office” by getting killed.

Meanwhile, Polymarket, which largely operates outside of the United States, offers plenty of war markets—but legislation is unlikely to impact these offerings. The platform is currently offering a market on whether Israeli Prime Minister Benjamin Netanyahu will be “out” by certain dates; someone recently wagered $177,000 that he would be out by March 31. Polymarket would likely resolve the market to “yes” and allow its bettors to profit if Netanyahu dies, just as it did when Khamenei was killed.

One of the reasons Senator Murphy is so passionate about prediction markets is because he sees them as vectors for insider trading. The Israeli government, for example, has charged two of its citizens with leaking classified information by placing Polymarket bets tied to the war in Iran. The Connecticut lawmaker suspects that other trades related to the conflict may have been carried out by members of Trump’s inner circle who have advanced knowledge about military operations. “It's bone chilling to think that there are staffers inside the situation room that are pushing the United States into war, not because it's good for our security, but because they're going to make $100,000 off it,” he says.

The Trump Administration denies that its staffers have engaged in insider trading. “The only special interest guiding the Trump Administration’s decision-making is the best interest of the American people,” says White House spokesperson Davis Ingle.

As Murphy and other lawmakers continue to push for federal legislation, a parallel wave of state-level legal battles is beginning to shape how prediction markets can operate. A judge in Nevada just issued a temporary restraining order against Kalshi that could force the company to cease operations in the state, following a similar ban placed on Polymarket’s US arm. And the charges brought by Arizona earlier this week demonstrate that state authorities are now thinking of ways to act beyond cease-and-desist letters and civil enforcement actions.

“These charges were filed to circumvent federal court and short-circuit the normal judicial process,” says Kalshi’s Diana.

The charges brought in Arizona may end up being consequential, though they are misdemeanors. “The Arizona attorney general may have cracked the code,” says gaming attorney Daniel Wallach, who calls state criminal charges a potential “kryptonite” for Kalshi, since federal courts typically abstain from exercising their jurisdiction while there are ongoing criminal proceedings. Wallach suspects that other states may follow suit.

Kalshi is taking a proactive approach to try to prevent that from happening. On Friday the company filed a motion in Ohio to block the state’s attorney general from pursuing civil and criminal charges while it appeals a ruling that found it must comply with state gambling laws. “These charges are meritless, and we look forward to fighting them in court,” Diana says.

For people following along with all the drama, this week also brought a new gathering place to keep up with prediction market news—Polymarket is opening a pop-up bar in Washington, D.C. for the weekend.