Kalshi Faces Backlash After $50M Market on Khamenei’s Death Sparks Rule Dispute

Prediction markets saw heavy trading (and backlash) on Saturday as news spread of U.S. and Israeli strikes on Iran, with bets tied to political outcomes and, indirectly, death.

Bubblemaps said it identified several new crypto wallets linked to Polymarket that collectively made more than US$1.2 million (AU$1.84 million) from Iran strike-related markets.

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Kalshi’s Controversial Khamenei contract

Kalshi faced the sharpest scrutiny over a contract titled “Ali Khamenei out as Supreme Leader?”, which had been live since Jan. 9. Prediction market analyst Dustin Gouker said it has drawn more than US$50 million (AU$76.5 million) in total volume, including about US$20 million (AU$30.6 million) on Saturday alone.

Kalshi CEO Tarek Mansour said Khamenei was killed in the strikes early Saturday and defended the contract’s design. “We don’t list markets directly tied to death,” he wrote on X, adding that Kalshi writes rules to limit profiting from death when it could affect outcomes.

In these instances, we make the caveat clear in the rules and in the market page, but today is a good learning that we can do more in terms of improving the UX and adding more ways to surface the rules. We are committed to improving.

Tarek Mansour, CEO of Kalshi.

Under the CFTC-filed terms, Kalshi said the market would settle at the last-traded price before Khamenei’s death, rather than paying out a binary “Yes.” Mansour said the cutoff was 1:14 a.m. ET Saturday, and that trades entered after his death would be refunded.

Disputed wording and promotion

The settlement drew complaints after Kalshi paused trading around 2:59 p.m. ET and closed the contract at 10:06 p.m. ET, according to DeFi Rate. Kalshi issued two clarifications, saying earlier settlement language was “grammatically ambiguous.”

A key dispute was timing, as the CFTC language referenced the last price “prior to the death,” while the market page referenced the last price before “confirmed reporting of death,” leaving a gap that covered hours of active trading.

Criticism also targeted Kalshi’s marketing because, as reports of Khamenei’s death circulated, Kalshi posted that the odds he was out had surged to 68%, a post Mansour reposted. Amanda Fischer of Better Markets, a former SEC chief of staff, called it a “proxy market on assassination.”

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