Kalshi Inc. should’ve paid out on a $54 million market speculating when Iran’s Supreme Leader Ali Khamenei would vacate his role after he was killed during US and Israeli airstrikes, a proposed class action said.
Kalshi and its exchange’s plain-language rules made traders who predicted his departure expect payouts, and they didn’t adequately disclose a “death carveout” until after news of Khamenei’s death spread, said the complaint filed in the US District Court for the Central District of California. Then rather than halt trading as reports of military strikes accumulated Feb. 28, Kalshi lured more traders into “yes” positions on Khamenei’s exit while knowing it wouldn’t deliver payouts, Thursday’s suit said.
“With an American naval armada amassed on Iran’s doorstep and military conflict not merely foreseeable but widely anticipated,” traders and Kalshi “understood that the most likely—and in many cases the only realistic—mechanism by which” the 86-year-old “autocratic leader would ‘leave office’ was through his death,” the suit said.
The language on Kalshi’s market “was clear, unambiguous, and binary” that if Khamenei left office, those with “yes” positions would receive their full payout, according to the complaint.
Kalshi’s CEO said on social media Feb. 28 that the company doesn’t list markets that are “directly tied to death.”
As backlash mounted, CEO Tarek Mansour said in a March 1 post Kalshi would reimburse fees and net losses and that the company would update how it presented similar markets with a death carveout “so traders can see the exception more clearly before they trade.”
“While the rules were clear and we tried our best to highlight them, traders vocalized they were not prominent enough. We heard you, and we decided to reimburse out of pocket for all fees and all net losses from trading in the market,” Mansour said.
Platforms like Kalshi’s have recently come under widespread scrutiny, including over prediction markets related to geopolitical conflict, as they fight a widespread legal battle over preemption. States say these markets’ event contracts, mainly sports-related, are gambling subject to their regulations. Prediction market providers and President
Proposed Class
Novian & Novian LLP represent the Kalshi traders, Adam Risch and Yonatan Gliksman. Their proposed class would cover those in the US who held “yes” on Kalshi’s “Ali Khamenei out as Supreme Leader?” market across any expiration date when trading halted Feb. 28. Expiration dates speculated on whether that outcome would occur before March 1, before April 1, and so on. Risch and Gliksman also seek to represent subclasses based on when they acquired their “yes” positions.
The traders seek damages, a return of any ill-gotten gains, injunctive relief requiring updated disclosure practices, and more. They alleged breach of contract, violations of certain California laws, among other claims.
Kalshi didn’t immediately respond to an email seeking comment.
The case is Risch v. KalshiEX LLC, C.D. Cal., No. 2:26-cv-02390, complaint filed 3/5/26.
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