Prediction markets platform Kalshi faces a class action lawsuit alleging it misled users in a market on Iranian leader Ayatollah Ali Khamenei’s departure. The suit, filed in California, claims Kalshi employed a “death carveout” rule that prevented standard payouts after Khamenei’s confirmed death, instead settling trades at the last market price. Plaintiffs who held “yes” contracts seek compensatory and punitive damages.
Kalshi is facing a class action lawsuit over its handling of a market concerning former Iranian Supreme Leader Ayatollah Ali Khamenei. The suit was filed in the District Court for the Central District of California and alleges a “predatory scheme to exploit retail consumers.”
Plaintiffs claim they correctly predicted Khamenei’s confirmed death would result in a “yes” payout of $1 per share for contracts on his departure by March 1. Instead, Kalshi invoked a “death carveout provision” in the market rules. This clause stated that if the leader left office “solely because they have died,” the market would “resolve based on the last traded price.”
The plaintiffs allege these critical rules were not adequately disclosed. “Plaintiffs and the proposed class members—who correctly predicted the outcome—did not receive the amounts they were promised,” the suit reads. They are seeking compensation for the full value of the expected “yes” payouts and punitive damages.
Following social media backlash, Kalshi CEO Tarek Mansour explained the platform’s policy. “We don’t list markets directly tied to death,” he stated. “When there are markets where potential outcomes involve death, we design the rules to prevent people from profiting from death. That is what we did here.”
Mansour acknowledged the need for improved user experience in surfacing such rules. Kalshi subsequently reimbursed all fees and net losses from the market, which saw over $54 million in total trading volume. The platform’s CEO reiterated the firm’s stance, saying, “We stand by principle and law,” and noted the company made no money on the market.
