TLDR
- A class action lawsuit has been filed against Kalshi regarding the resolution of a prediction market focused on Iranian Supreme Leader Ali Khamenei’s departure from power.
- Contract holders anticipated receiving complete $1 payouts following reports of Khamenei’s death on February 28, but the platform implemented a “death carveout” provision.
- Trading activity in this market surpassed $54 million; the two plaintiffs named in the suit held approximately $259.84 worth of contracts.
- While Kalshi issued refunds for trading fees and net losses, claiming users didn’t lose funds, plaintiffs are demanding full contract compensation plus additional punitive damages.
- According to Kalshi co-founder Tarek Mansour, the provision was explicitly outlined in the terms and the platform prohibits markets enabling profit from death outcomes.
A class action complaint has been lodged against prediction market platform Kalshi in the US District Court for the Central District of California. The litigation revolves around the platform’s settlement of a market questioning whether “Ali Khamenei out as Supreme Leader?”
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
Participants in this market wagered on whether Khamenei would exit his position before March 1, 2026. Those purchasing “yes” positions anticipated receiving the maximum $1 per share if their prediction proved accurate.
News organizations widely reported Khamenei’s passing on February 28. Market participants assumed this development would trigger full-value payouts on their holdings.
However, Kalshi enforced what the platform terms a “death carveout provision.” Under this stipulation, when a leader’s departure results exclusively from death, settlement occurs at the final trading price instead of distributing complete payouts to winning positions.
The complaint alleges this provision was concealed within complex market documentation. Plaintiffs contend the rule lacked sufficient visibility for typical users to discover before executing trades.
According to the legal filing, the carveout “was not incorporated into the user-facing rules summary.” The lawsuit further asserts the policy wasn’t presented in a manner that would notify a “reasonable consumer.”
The document states that Kalshi subsequently acknowledged their previous disclosures contained “grammatically ambiguous” language.
The plaintiffs identified in the case maintained positions valued at roughly $259.84. Overall trading activity for this market topped $54 million.
Kalshi’s Response to the Lawsuit
Tarek Mansour, co-founder of Kalshi, publicly responded to the controversy on X. He explained the platform maintains a firm policy prohibiting markets that enable users to financially benefit from death events.
“We don’t list markets directly tied to death,” Mansour stated. He emphasized the rule existed within the market’s terms and wasn’t concealed from users.
Kalshi provided reimbursements covering all trading fees and net losses associated with this market. According to the company’s statement, no participant experienced financial losses.
Mansour conceded the platform has room for improvement regarding how rules are presented to traders before they commit to positions.
What Plaintiffs Are Seeking
The refunds provided have not satisfied the plaintiffs. Their demands include compensatory damages matching the complete expected payout value of their contracts.
Additionally, they’re requesting punitive damages designed to prevent comparable practices going forward.
The legal action characterizes the carveout policy as “predatory” and constituting an “unfair business practice.” Plaintiffs argue that for a market concerning an 85-year-old leader facing military tensions, death represented the most probable scenario.
The platform recently completed a funding round valuing the company at $11 billion. This achievement came amid unprecedented trading volumes across prediction markets during 2026.
