Popular prediction markets platform Kalshi is facing a class action lawsuit related to its handling of a market on the unseating of Iranian leader Ayatollah Ali Khamenei.
The plaintiffs allege that they expected that in the event of Khameni’s death—which was confirmed by multiple outlets on February 28—holding contracts for Khameni out by March 1 would resolve to “yes,” ultimately paying each share $1 as a correct prediction.
Instead, the prediction market utilized a “death carveout provision,” a rules clause which indicated that if the Supreme Leader left office “solely because they have died,” then the market would “resolve based on the last traded price.” In other words, with this clause, the exchange did not pay out “yes” shares at $1.00, as expected by the plaintiffs.
“Plaintiffs and the proposed class members—who correctly predicted the outcome—did not receive the amounts they were promised,” the suit reads. “Plaintiffs Risch and Gliksman, like thousands of other consumers who correctly predicted the outcome, received arbitrary amounts unilaterally determined by [Kalshi] that were significantly lower than their respective contract values.”
As social media pushback began to build on February 28, the day of Khameni’s death, Kalshi CEO Tarek Monsour took to X to explain his firm’s decisions.
The plaintiffs allege those rules, like the death carveout “upon which defendants relied was not adequately disclosed to plaintiffs or the proposed class members at the time they entered into their trades.”
“In these instances, we make the caveat clear in the rules and in the market page, but today is a good learning that we can do more in terms of improving the UX and adding more ways to surface the rules,” said Monsour.
Plaintiffs in the case held around $259.84 worth of positions in the market, which ultimately generated more than $54 million in total trading volume.
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".
In the suit’s relief requests, plaintiffs and all others similarly situated are requesting compensatory damages representing the full value of “yes” payouts, and “punitive damages in an amount sufficient to punish defendants and deter similar conduct in the future.”
