- Prediction market platform Kalshi is facing a class action lawsuit in California for its handling of a bet on Iranian leader Ali Khamenei’s removal.
- The suit alleges Kalshi used a non-prominent “death carveout” rule to resolve the market at the last traded price instead of paying $1 for correct predictions after Khamenei’s death.
- Kalshi CEO Tarek Mansour defended the decision, stating it prevents profiting from death, and reimbursed all fees and net losses from the market.
- The plaintiffs seek compensatory and punitive damages for what they call a “predatory scheme to exploit retail consumers.”
Popular prediction markets platform Kalshi is facing a class action lawsuit in California over its controversial resolution of a market concerning former Iranian Supreme Leader Ayatollah Ali Khamenei. Plaintiffs allege the platform intentionally misled traders on its “Ali Khamenei out as Supreme Leader?” market.
They expected a $1 payout after Khamenei’s confirmed death on February 28. However, Kalshi invoked a “death carveout provision,” settling the market at its last traded price instead.
Consequently, traders who correctly predicted the outcome received significantly less than their contract’s full value. CEO Tarek Mansour explained on X that the firm doesn’t list markets directly tied to death.
He stated the rules were designed to “prevent people from profiting from death.” The lawsuit argues this critical rule was not adequately disclosed to consumers when they placed their trades.
Following social media backlash, Kalshi reimbursed all fees and net losses from the market. Mansour later highlighted that “no trader lost money” as a result.
The plaintiffs, who held about $260 in positions, are now seeking full compensatory damages and punitive fines. The market in question generated over $54 million in total trading volume.
Meanwhile, Mansour reiterated the company’s stance in response to the lawsuit. He affirmed that Kalshi adhered to its published rules and made no money from the contentious market.
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