Prediction market firm Kalshi is refusing to pay out $54 million in winning bets on the recent death of Iranian Supreme Leader Ayatollah Ali Khamenei.
The news comes after allegations of insider trading on the market. The company is now saying those who traded on the removal of Khamenei won’t be paid because the platform doesn’t allow trading “directly tied to death.”
That didn’t sit well with users of the site. Many of whom said that caveat wasn’t included in the language of the original wager. The market simply asked: “Ali Khamenei out as Supreme Leader?”
Some customers are now suing the company to receive their expected winnings.
Lawsuit Says Kalshi Now Offers Warning Concerning Deaths
Attorneys in one case argue that it was illogical not to assume death was a possibility considering the US military buildup in the region prior to Khamenei being killed on Feb. 28.
“With an American naval armada amassed on Iran’s doorstep and military conflict not merely foreseeable but widely anticipated, consumers understood that the most likely – and in many cases the only realistic – mechanism by which an 85-year-old autocratic leader would ‘leave office’ was through his death,” the lawsuit said. “Defendants understood this as well.”
The lawsuit, which was filed in California, further alleges the market was “deceptive” and “predatory,” according to Reuters.
Beyond offering the market, Kalshi reportedly promoted wagering on Khamenei’s removal on X and in push notifications to users.
Instead of paying out winnings, the company reimbursed users $2.2 million for funds wagered and fees.
“Our rules were clear from the beginning. We never changed them, and we settled based on the rules,” a Kalshi spokesperson told the New York Post. The company has since added a warning on similar markets that payouts wouldn’t be made if death was the outcome of the wager.
Insider Trading Concerns Persist
Some have also alleged that insiders made millions of dollars on Polymarket wagering on possible strikes on Iran right before the conflict began.
The companies are regulated by the Commodity Futures Trading Commission (CFTC), which prohibits markets that involve terrorism, assassination, or war. Sen. Chris Murphy (D) said he plans to introduce legislation that would ban betting tied to government actions.
“This is American commercial immorality on steroids,” Murphy told the Washington Post. “People shouldn’t be rooting for people to die because they placed a bet.”
This isn’t the first time prediction markets have faced insider trading allegations. In December, a user won 22 of 23 bets on Polymarket, winning more than $1 million in a single day. The bets all involved Google search markets, sparking insider trading allegations.
The next month, prediction markets had a similar scandal. Several traders wagered on the removal of Venezuelan strongman Nicolás Maduro in the hours before he was captured by US forces.
