Kalshi, a popular prediction market platform, is embroiled in a class-action lawsuit filed in California. The suit centers on the company's handling of a market created around the potential ousting of Iranian leader Ayatollah Ali Khamenei.
Plaintiffs allege Kalshi engaged in a "predatory scheme" by failing to pay out contracts as expected by users. Specifically, a market designed to resolve based on Khamenei's status as Supreme Leader was resolved using a "death carveout provision" after his confirmed death. This clause dictated that if the leader left office solely due to death, the market would resolve based on its last traded price, rather than paying out "yes" contracts at face value.
Kalshi CEO Tarek Mansour stated on X that the platform avoids listing markets directly tied to death and designs rules to prevent profiting from such events. He acknowledged that user experience regarding rule disclosure could be improved, but maintained the company adhered to its principles and law, reimbursing all fees and net losses so no trader lost money.
The lawsuit seeks compensatory damages for the full value of "yes" payouts and punitive damages to deter similar conduct. The plaintiffs claim the market rules, including the death carveout, were not adequately disclosed at the time of trading. This legal challenge comes as prediction markets gain popularity and trading volumes increase, with Kalshi having recently raised funds at a significant valuation.