Kalshi prediction market faces lawsuit over Khamenei contract

"The complaint, reviewed by ReadWrite and filed March 5 in the U.S. District Court for the Central District of California, says the platform ran a market asking whether Iran's supreme leader would leave office before certain dates, then changed how the contracts were settled after the triggering event occurred. According to the complaint, thousands of traders believed they had winning positions but never received the full payouts they expected."

"Traders believed that condition was met on February 28, 2026, when U.S. and Israeli strikes reportedly killed the Iranian leader. As news spread across media and social platforms, many users expected the market to settle in their favor. Instead, the complaint says Kalshi halted trading and later announced the contracts would not resolve to "yes.""

"The case focuses on a provision the company calls a "death carveout." Kalshi relied on that clause to argue that if a leader leaves office solely because of death, the market should not resolve normally. Instead, payouts are determined using the market's last traded price prior to the death."

Two California traders filed a federal class action lawsuit against prediction market operator Kalshi, alleging the platform misled users and refused to pay contracts tied to Iran's Supreme Leader Ali Khamenei's reported death on February 28, 2026. Traders purchased "yes" contracts in a market asking whether Khamenei would leave office before March 1, 2026. When news of his death spread, thousands of traders expected winning payouts. However, Kalshi halted trading and announced the contracts would not resolve to "yes," instead settling positions using the last traded price before the death news circulated. The dispute centers on Kalshi's "death carveout" clause, which the plaintiffs claim ordinary users never saw, dramatically reducing expected payouts.

Read at ReadWrite