Kalshi Hit with Class Action Lawsuit Regarding Khamenei Prediction Market Disbursement

The prediction markets platform Kalshi is currently dealing with a class action lawsuit concerning the resolution of a market related to the leadership of Iran’s Supreme Leader, Ayatollah Ali Khamenei.

Key Takeaways:

• Kalshi is under a class action lawsuit regarding its resolution of a prediction market about Iran’s Supreme Leader Ayatollah Ali Khamenei.
• Plaintiffs allege that the platform restricted full payouts by implementing a “death carveout” rule following reports of Khamenei’s death.
• Kalshi asserts that this rule was intended to prevent traders from profiting directly from an individual’s death.

The lawsuit, lodged in the US District Court for the Central District of California, claims the company misled traders in a market titled “Ali Khamenei out as Supreme Leader?”

Plaintiffs argue that the platform created expectations that contracts forecasting Khamenei’s removal by March 1 would pay out at their full value if the prediction was accurate.

Kalshi Traders Challenge Payout Following Application of ‘Death Carveout’ Rule

The complaint states that Khamenei’s death was reported by various media outlets on February 28.

Traders holding contracts predicting his departure from office by the next day anticipated their “yes” shares to resolve at $1 each, which is the standard payout for a correct prediction on the platform.

However, Kalshi invoked a rule referred to as a “death carveout provision.”

This clause indicates that if the leader exits office solely due to death, the market outcome will resolve based on the last traded price instead of paying out the full value of winning contracts.

The plaintiffs contend that this ruling deprived traders of the payouts they believed they had rightfully earned.

“Plaintiffs and the proposed class members, who accurately predicted the outcome, did not receive the amounts they were promised,” the lawsuit claims.

The complaint asserts that traders received amounts that were “arbitrary” and significantly lower than the anticipated contract value.

Two named plaintiffs reportedly held approximately $259.84 worth of positions in the market. Overall trading activity for the event surpassed $54 million in volume.

The legal filing further contends that the rule used to determine the payout was not adequately disclosed to users when they placed their trades.

According to the plaintiffs, the death-related clause was only found in technical market rules that many traders might not have noticed prior to placing their bets.

Public backlash grew on social media following the market’s resolution. In response, Kalshi CEO Tarek Mansour addressed the matter in a post on X, clarifying that the platform avoids markets that enable traders to profit directly from an individual’s death.

“We don’t list markets directly tied to death,” Mansour stated. “When potential outcomes involve death, we design the rules to prevent people from profiting from death.”

We stand by principle and law:
1. Kalshi didn’t deviate from its market rules. They were clear that death did not resolve the market to “Yes”.
2. Kalshi’s rules prevented a ‘death market’, where traders directly profit from death. This is a good thing (+ we’re a US based… https://t.co/gXMeQECFLz

— Tarek Mansour (@mansourtarek_) March 6, 2026

He acknowledged that the company could enhance how rules are presented on market pages. Mansour noted that the situation underscored the necessity for improved user experience design to ensure traders have a better understanding of contract conditions before engaging.

Kalshi Claims Traders Did Not Incur Losses Following Market Dispute

Kalshi also refunded all trading fees and net losses related to the market. The company asserts that no traders ultimately lost money as a result of the resolution.

Despite the reimbursements, the plaintiffs are pursuing compensatory damages that reflect the full value of the expected payouts, along with punitive damages aimed at deterring similar actions in the future.

Mansour stated that the company adhered to its established rules and emphasized that Kalshi did not profit from the market.

The lawsuit emerges as prediction markets attract increasing attention. Kalshi recently obtained funding at an $11 billion valuation, highlighting the rapid expansion of the sector and the growing trading activity across event-based markets.

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