Polymarket users placed hundreds of bets of at least $1,000 predicting an imminent American strike, raising concerns about insider trading.
Mick Mulvaney also said prediction markets, by offering contracts on events such as wars, could represent a security risk for the U.S.
Wagers were placed over the weekend about the fate of Iranian leader Ayatollah Ali Khamenei, who was killed in the bombardment of Iran.