Kalshi Faces Class Action Over Khamenei Prediction Market Payout Dispute

Prediction market platform Kalshi is embroiled in legal turmoil after traders filed a class action lawsuit in the US District Court for the Central District of California. The dispute stems from the resolution of a market titled "Ali Khamenei out as Supreme Leader?" which saw over $54 million in trading volume.

Traders holding "yes" contracts expected full $1 payouts following reports of Khamenei's death on February 28, 2026. However, Kalshi invoked a "death carveout" rule, stating the market wouldn't resolve to "yes" due to death. The platform reimbursed trading fees and net losses, maintaining no users lost money, but plaintiffs demand full contract value plus punitive damages.

Kalshi co-founder Tarek Mansour defended the platform's position, emphasizing the rules were clearly stated to prevent creation of "death markets" where traders profit directly from someone's demise. The case highlights the evolving regulatory challenges facing prediction markets as they gain mainstream traction.