Prediction market platform Kalshi faces a proposed class action from traders who say the exchange should have paid out bets tied to a market on whether Iran’s Supreme Leader Ali Khamenei would leave office.
The disputed market attracted about $54 million in trading volume before it was halted following reports of US and Israeli airstrikes on Iran.
According to a Bloomberg Law report, the complaint filed in the US District Court for the Central District of California argues that Kalshi’s market rules led traders to expect payouts if Khamenei left office. The lawsuit claims the platform did not clearly disclose a “death carveout” until after reports of the strikes began circulating.
Traders allege Kalshi allowed trading to continue on Feb. 28 as reports of strikes on Iran surfaced, encouraging additional “yes” bets on Khamenei’s departure despite knowing they would not pay out.
The market asked traders to predict whether Khamenei would leave office by specific dates. The complaint says the contract language was “clear, unambiguous, and binary,” promising full payouts to “yes” positions if he exited the role.
Kalshi CEO Tarek Mansour responded to the controversy on social media, stating that the platform does not offer prediction markets directly tied to a person’s death.
As criticism grew, Mansour later said the company would reimburse traders for fees and net losses linked to the market and update how similar contracts disclose death-related exceptions.
“While the rules were clear and we tried our best to highlight them, traders vocalized they were not prominent enough,” Mansour wrote in a March 1 post, adding that Kalshi would reimburse losses out of pocket.
The lawsuit was filed by traders Adam Risch and Yonatan Gliksman, represented by Novian & Novian LLP. The proposed class includes US traders who held “yes” positions on the market predicting whether Khamenei would leave office.
Plaintiffs seek damages, restitution, and court orders requiring Kalshi to improve disclosure practices. The complaint alleges breach of contract and violations of California law.
Prediction market platforms such as Kalshi have recently drawn increased regulatory scrutiny in the United States, with several states arguing that event contracts offered by these platforms constitute gambling under state law.