Hormuz toll kills peace odds on Warsh's first day

Kevin Warsh took the Fed chair oath at 11 AM ET at the White House — the first such ceremony there in nearly 40 years — and the market's immediate response was split: June FOMC no-change odds barely budged at 97.8%, while CME year-end hike odds jumped 11 points to 61%. The day's biggest single-market move came from Hormuz normalization, which shed 21 percentage points to 33% after Secretary of State Marco Rubio flatly rejected Iran's toll-system proposal. India simultaneously banned Polymarket outright and began the process of blocking Kalshi, the most sweeping national-level crackdown on prediction markets since their US resurgence.

⚠️ Insider-trading caveat — applies to all Iran-related markets in this issue. The 60 Minutes investigation (aired May 18) flagged nine linked accounts earning $2.4 million on Iran military contracts at a 98% win rate. 1 Treat every Iran probability below as a directional signal rather than clean crowd-wisdom. This caveat expires approximately June 1.

Market snapshot

Market	Current odds	24h change	Volume (24h / lifetime)	Key catalyst
Hormuz traffic normal by Jun 30	33%	−21pp	~$340K / $6.8M	Rubio rejects Iran toll system
Iran peace deal by May 31	30%	+9pp	~$196K / $35.4M	Bounce from 20¢ low; 9 days to deadline
Iran peace deal by Jul 31	62%	+10pp	~$870K / —	Whale YES accumulation
Iran peace deal by Dec 31	74%	+5pp	~$3.1M / —	Long-dated diplomacy premium
Iran ceasefire (May 22 sub-market)	~90%	—	$4.3M total / new mkt	May 20-21 subs both settled 100% YES
Iran airspace closed by May 24	8%	−6pp	— / $26.2M	IKA commercial flights restored
June FOMC no-change	97.8%	~flat	$17.8M (24h)	Warsh oath; FOMC minutes digested
Fed rate hike by Dec 2026 (CME)	61%	+11pp	—	Hawkish April minutes + Warsh era begins
Fed zero cuts in 2026 (Polymarket)	70%	flat	$28M total	No new catalyst
Texas GOP Senate runoff — Paxton	95%	+33pp (vs pre-endorsement)	$16.7M total	Trump endorsement May 19
Brazil: Flávio Bolsonaro wins	~24%	−4pp	$50.2M total	Vorcaro scandal; poll −5.4pp
Dem 2028 nominee — Newsom	~30%	+5pp	—	No clear catalyst; AOC/Harris also +1pp

Iran and Hormuz: the toll proposal that killed a market

The clearest signal of the window: Polymarket's Hormuz traffic returns to normal by end of June collapsed from 54% to 33% — a 21-point drop — making it the largest single-day move across any Iran-related market. 2

The catalyst was a sequence of moves by Iran's newly formed Persian Gulf Strait Authority (PGSA). On May 20 the PGSA published an expanded control map that explicitly incorporated Emirati and Omani territorial waters into its management zone. Iran then opened talks with Oman about a permanent fee structure for Hormuz transits — the toll system. Rubio responded at the NATO foreign ministers' meeting in Stockholm: "No one in the world is in favor of a tolling system. It can't happen and it would be unacceptable." 3 He added: "If that were to happen in the Straits of Hormuz, it will happen in five other places around the world." 4

The Institute for the Study of War (ISW) noted in its May 21 special report that Iran's unified stance on Hormuz control stands in sharp contrast to its internal disagreements on nuclear concessions, which suggests the toll system isn't a bargaining chip — it's a stated outcome Iranian leadership is committed to. 5 Daily transits through the strait remain at 5-7 vessels, against a pre-conflict average of 100+. The June 30 resolution condition — a 7-day moving average of ≥60 arrivals per IMF Portwatch — is nowhere close.

Meanwhile the UN Security Council is reviewing a Bahrain-sponsored Hormuz resolution that Rubio says has "more co-sponsors than any resolution in UN history" — a claim that signals broad international alignment against the toll system, though Chinese and Russian vetoes likely block its passage. 4

Iran flag flying over the Strait of Hormuz with a cargo vessel anchored in the background — Iranian flag over the Strait of Hormuz near Larak Island, May 16, 2026 3

What about the peace deal markets? The May 31 contract bounced from a low of 20¢ back to 30% by ~1:30 PM UTC — a 10-point intraday recovery — though the $1.3M NO trade placed by account aekghas at 82¢ remains the dominant order-flow anchor on the short side. 6 Rubio confirmed "a little bit of movement" in negotiations while simultaneously closing the door on tolls, which best explains the bounce — the market stripped out the toll-resolution scenario but kept a residual probability of a separate framework. Nine days remain until May 31 expires. 4

The longer-dated contracts moved more decisively bullish: July 31 rose +10pp to 62%, December 31 rose +5pp to 74%. 7 A wallet tracked by @MacOnPolymarket deployed ~$27K across YES positions in the July market; the account's total cross-market YES exposure would pay out over $150K if a deal is confirmed by July 31. The market's structure — May 31 at 30%, July 31 at 62%, December 31 at 74% — implies the base case is eventual deal, with the primary debate over timing, not outcome.

The new Iran ceasefire continuation market (launched May 19) has already drawn $4.3M in total volume across its 11 daily sub-markets. 8 May 20 and May 21 both resolved 100% YES. The May 24 sub-market on airspace closure dropped from 14% to 8% following Iran's restoration of commercial flights to Imam Khomeini International Airport — the first such service since the April conflict. 9

Brent crude held near $104–$105/barrel, roughly flat from yesterday's $105.83. 10 Barclays maintained its 2026 Brent average forecast at $100 while flagging upside risks, consistent with a market that isn't yet repricing a Hormuz resolution.

Tradeable expressions:

Sell Hormuz June 30 below 35%: The gap between the June 30 contract (33%) and the blockade-lifted June 30 market (67%) reflects the market's read that the blockade announcement and the lane normalization are different milestones — the US could declare the blockade lifted while Iran still controls the lanes. If the UNSC resolution fails (likely, given China/Russia veto risk), the June 30 Hormuz normalization contract has limited upside from here.
Buy July 31 peace deal on dips to 58–60%: The ceasefire sub-markets resolving YES daily acts as a slow accumulation of "deal is still alive" evidence. A position that adds on dips toward 58% with a stop at 52% (July 31's price three sessions ago) captures the diplomacy-needs-time thesis, which the broader market appears to endorse.

Fed: Warsh takes office into a hike-probability surge

Kevin Warsh became the Federal Reserve's 17th chair at 11 AM ET May 22 at the White House — the first time a Fed chair has been sworn in there since Alan Greenspan in 1987. 11 Trump presided. Warsh was confirmed May 13 by a 54–45 vote — the narrowest margin in the institution's history. 12

The prediction market read on his first day is divided across timeframes. June FOMC no-change sits at 97.8% — essentially unchanged from yesterday — meaning the near-term calendar is settled. 13 But CME federal funds futures imply a 61% probability of at least one hike before year-end 2026, up from roughly 50% at the prior checkpoint. 14 Kalshi's "hike before July 2027" contract holds at 50%. Polymarket's "Fed rate ends 2026 at 3.75%" contract — which implies no movement from the current 3.50–3.75% band — is priced at 61%. 15

The fuel behind the hike-probability surge isn't Warsh's oath — it's the April FOMC minutes released May 21. The key passage: "A majority of participants highlighted that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent." 14 Policy firming is FOMC language for rate hikes. The April 29 vote itself was 8–4, the most dissent since 1992. Governor Stephen Miran voted for a 25bp cut; three others voted to strip the statement of its easing-bias language. 16

The inflation backdrop Warsh inherits: April CPI came in at 3.8% year-over-year (a three-year high), 14 and the Philadelphia Fed's Survey of Professional Forecasters projects headline CPI to spike to 6% this quarter (vs. a prior forecast of 2.7%). 14 The 10-year Treasury yield sits at 4.581%, up roughly 19 basis points since May 1 (from 4.39%). 16

The political tension is real. Warsh told the Senate during his confirmation hearing that inflation "is the Fed's choice" and that he would "absolutely not" act as a presidential proxy. 12 Trump, who spent months publicly pressing for cuts, has now gone quiet on the topic. Multiple economists cited by the New York Times assessed that the committee's next move is more likely a hike than a cut, and that current policy "may not even be restrictive." 11 Warsh's first substantive policy decision — including his own dot on the rate path — comes at the June 16–17 FOMC meeting.

Tradeable expressions:

Short TLT (long-duration Treasury ETF) put spread: June FOMC is priced as a non-event, but the September/December window is live. If the May CPI print (due mid-June) repeats at or above 3.8%, the case for a September hike strengthens. A TLT put spread with a September expiry captures the yield rise with defined downside.
Buy XLF (financials) / Sell XLU (utilities): Steeper yield curves and higher-for-longer rates benefit bank net interest margins (XLF) while hurting dividend-heavy utilities (XLU) that carry high duration sensitivity. The April minutes were the catalyst; a Warsh statement at the June FOMC that leans hawkish would extend the trade.

www.nytimes.com

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Elections: Texas 95%, Brazil splinters, Dems 2028

Texas Senate runoff (May 26). Polymarket's Texas Republican primary runoff market has $16.7M in total volume, the week's largest election market by volume. 17 Ken Paxton (Texas Attorney General, challenging incumbent senator John Cornyn) sits at 95% on Polymarket (Kalshi: 95.3%), up from roughly 62% before Trump formally endorsed Paxton on May 19. 17 A University of Houston poll released last week showed Paxton at 48% vs. Cornyn's 45% — within the margin of error. The election is May 26; a Paxton win would be read as a MAGA primary-purge of an establishment incumbent. Combined spending in the race has crossed $122M, making it the most expensive Senate primary in history.

Brazil 2026 presidential race. Flávio Bolsonaro (PL party, son of former president Jair Bolsonaro) dropped to ~24% on Polymarket from ~28% at yesterday's checkpoint after the first public poll following the Vorcaro scandal was published. 18 The AtlasIntel survey (May 21) showed Flávio at 34.3% nationally, down 5.4 percentage points from April's 39.7%. Lula holds at 47%. 18 The Vorcaro scandal — The Intercept Brasil's publication of WhatsApp messages showing Flávio sought R$61M (~$24M) in film financing from convicted fraudster banker Daniel Vorcaro — continues to erode his support. Flávio responded: "It is necessary to separate the innocent from the criminals. In our case, what happened was a son seeking private sponsorship for a private film about his own father's life." 19 Flávio also replaced his campaign communications director on May 21. PL party insiders reportedly set an informal 10–15-day window: if the polling drop reaches 9–10 percentage points with no recovery, the party may reopen the candidacy question. 18 Tradeable expression: the USDBRL long (dollar vs. Brazilian real) benefits from both a Lula lead and from right-wing political fragmentation — a weaker Flávio historically correlates with softer real.

Dem 2028. Gavin Newsom's prediction market odds rose approximately 5 percentage points to ~30% this window, extending his lead over the fragmented Democratic field. 20 AOC and Kamala Harris each moved +1pp to ~10%. A Harvard/Harris poll showed Harris jumping from 41% to 50% among Democratic primary voters — a stark divergence between primary-voter polling and prediction market odds. Jon Ossoff (~7%) and Rahm Emanuel (~5%) are the notable new entrants. The gap between Harris's 50% in polling and 10% in prediction markets is the interesting tension here: markets are pricing a 2024 rematch fatigue that primary polls haven't fully captured.

valorinternational.globo.com

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Platform watch: India bans both, CFTC parlays, CLARITY

India blocks Polymarket; Kalshi next. India's Ministry of Electronics and Information Technology (MeitY) issued a formal blocking order against Polymarket on May 22, citing IT Act Section 69A. 21 A MeitY official told ThePrint: "We have already issued a blocking order to Polymarket and are in the process of issuing an order to Kalshi as soon as Friday." 22 Polymarket is already inaccessible in India at ISP network level. The legal basis is the Prevention of Online Real-Money Gaming Act (PROGA) 2025, passed in August 2025 and in effect since May 1, 2026, which classifies prediction markets as prohibited "online money games." The penalty for non-compliant ISPs is up to seven years imprisonment. Kalshi's legal counsel Valeria Vouterakou told Bloomberg the company "will comply with the government's requests should they make them." Polymarket said it is "committed to complying with applicable laws and regulations across all jurisdictions in which it operates" without naming India as a restricted region. The country has a large active retail investor base and was a meaningful user segment for both platforms. Policy analyst Deepro Guha (The Quantum Hub) flagged the mirror-site problem: "The mirror sites problem becomes a real problem because that is happening at an institutional level, and to keep following that becomes really difficult." 22 This is the first time a single jurisdiction has moved against both US-based prediction market platforms simultaneously.

Polymarket self-certifies sports parlays with CFTC. Polymarket US (QCX LLC) submitted a self-certification to the CFTC on May 20 for "Combinatorial Outcome Contracts" (CAOCs) — essentially sports parlays that bundle multiple event legs into a single binary contract, resolving to $1.00 only if all legs hit. 23 Under self-certification, listing can begin with no CFTC affirmative approval — the agency has 10 business days to object or the contract lists. Polymarket submitted a second, confidential filing simultaneously. On the same day, SEC Chair Paul Atkins opened a public comment period on prediction market ETFs, noting "novel products raise novel questions." 23 More than 24 ETF applications from Bitwise, Roundhill, and GraniteShares are pending. Bloomberg ETF analyst Eric Balchunas commented: "The SEC is clearly struggling with prediction market ETFs and needs more time and input. These are an entirely new beast like crypto ETFs." 23 A Senate Commerce Subcommittee hearing on the same day saw Sen. Marsha Blackburn call prediction platforms "shadow sports bookmakers."

CLARITY Act floor vote window. The Digital Asset Market Clarity Act cleared the Senate Banking Committee 15–9 on May 14 (two Democrats crossed party lines) and entered a 30-day window for a Senate floor vote. 24 Galaxy Research puts 2026 passage odds at 75%. Polymarket has the contract at roughly 62–67%. No floor vote date has been formally scheduled as of this writing.

Quick hits

BTC and ETF flows. Bitcoin is trading at $76,979 as of 10:09 AM EDT, down ~$1,045 (-1.3%) from yesterday's ~$78,024. 25 US spot BTC ETFs recorded a fifth consecutive day of net outflows on May 21: $100.9M, after $648.6M, $331.1M, $290.4M, and $325.6M in the prior four sessions (Farside data). 26 The deceleration seen over May 20 ($61.5M) did not hold. XRP ETFs moved the other direction, drawing $8.88M in net inflows on May 21 and ~$42M over the prior week, with Santiment data showing 4,300 new XRP wallet addresses in a single day. 27

Workday beat; Polymarket market resolves YES. Workday (WDAY) posted Q1 FY2027 non-GAAP EPS of $2.66 (5.7% above the $2.51 consensus) and revenue of $2.542B (1.1% beat), with subscription revenue up 14.3% year-over-year. 28 The stock jumped 10.8% to $135.61 in after-hours trading. Polymarket's pre-earnings "Will Workday beat quarterly earnings?" market had assigned 93% probability to a YES outcome; the result confirmed the bet. CEO Aneel Bhusri — now in his first full quarter as sole CEO following a leadership restructuring — said: "We had a great Q1, and it makes one thing clear: Workday is ready for this AI moment." 28

Cover image: Kevin Warsh at his Senate confirmation hearing, raising his right hand before the oath, with the nameplate reading "THE HONORABLE KEVIN WARSH." Image via Warsh to Take Charge of Fed Facing Rising Inflation Threat