The American people are surprised that their government is "working like a gun cartel" by sending $400 million to Iran earlier this year, Sen. Tom Cotton, R-Ark., said Sunday.

The Obama administration came under fire this week for sending $400 million in foreign cash to Iran the same day four American hostages were released. While the administration defended it as settling a decades-old court claim, critics, including Cotton, R-Ark., said that there's no doubt the money was a ransom.

"I think it's surprising to the American people that its government was working like a gun cartel," Cotton said on "Fox News Sunday."

Cotton also said that, in giving the money to the No. 1 state sponsor of terrorism, there's "no doubt" that some of it ended up funding terrorist organizations.

Even if the administration says it isn't a ransom, Cotton says it matters more how Iran, as well as criminal or terrorist groups around the world, see the payment. If it's perceived by those groups to be a ransom, it could encourage the taking of more U.S. hostages in hopes of getting money.

"They clearly think that this was a ransom payment ... that's why it's so dangerous," Cotton said.