Prediction market platform Kalshi has voided trading positions and is reimbursing fees following the confirmed death of Iran's Supreme Leader Ayatollah Ali Khamenei, citing a long-standing policy against "death markets." Co-founder and CEO Tarek Mansour stated the platform designs rules to prevent profiting from death, which was applied to the "Ali Khamenei out as Supreme Leader" market.
The market, live since January 9, saw over $50 million in total volume, with approximately $20 million traded on Saturday alone following reports of Khamenei's death after a U.S.-Israeli strike. According to CFTC-filed contract terms, the market was to settle at the last-traded price before Khamenei's death, recorded at 1:14 AM ET on Saturday. Kalshi is reimbursing all fees from this market and will pay traders with positions open before the death at that last-traded price. Users who opened positions after the death are being reimbursed the difference between their entry price and the last-traded price.
The settlement process faced technical and communication issues. Kalshi halted trading at roughly 2:59 PM ET and formally closed contracts at 10:06 PM ET. The platform issued clarifications, acknowledging prior settlement language was "grammatically ambiguous," as terms referenced the "last traded price (prior to the death)" while the market page read "last traded price prior to confirmed reporting of death." This distinction was critical due to hours of active trading between the actual death and public confirmation.
The decision sparked significant user backlash, with accusations that Kalshi was curtailing profits. Critics highlighted a perceived inconsistency, noting Kalshi previously settled a "Who will be at Trump's inauguration?" market involving Jimmy Carter to "No" after Carter's death in late 2024. Mansour defended the Khamenei market's design, arguing it served legitimate purposes by reflecting the geopolitical and economic implications of Iranian leadership changes, which can occur without death.
The controversy emerges amid heightened scrutiny of prediction markets. Six Democratic senators, led by Adam Schiff, recently urged the CFTC to ban contracts resolving on an individual's death, citing controversial contracts on rival platform Polymarket related to Venezuela and Ukraine. The industry's Coalition for Prediction Markets, which includes Kalshi, responded that such contracts have no place on regulated American exchanges.
Furthermore, the news follows suspicions of insider trading activity on prediction markets. In February, six traders on Polymarket netted about $1 million betting on a U.S. strike on Iran, with wallets created that month and some positions filled hours before explosions were reported in Tehran. This pattern has fueled ongoing investigations and speculation about information leaks tied to geopolitical events.
