Iranian Ayatollah Khamenei’s Death Sparks Revolt Among Kalshi Customers

Upstream Following the United States and Israel’s attack on Iran, prediction markets have seen a frenzy of conflict-related activity. Speculators raced to guess when the first missile strikes would begin and who might be hit, placing trades worth hundreds of millions of dollars in total. There are already big winners, but also big losers. This weekend, after the death of Iranian Ayatollah Ali Khamenei, Kalshi faced a revolt from his clients over how he handled a $54 million deal regarding the fate of Iran’s leaders. “People are absolutely furious,” says Kalshi shopkeeper Nicholas Mahoney.

The market offered “yes” or “no” deals on whether Khamanei would be “out” as the nation’s supreme leader. On Saturday morning, as rumors of Khamenei’s death circulated online but no official announcement had yet been made, Kalshi was promoting the market on social media. After his assassination was confirmed, many traders who had purchased “yes” contracts assumed they had made a profit – after all, Khamenei was clearly no longer the supreme leader.

Instead, Kalshi suspended the market for review on Saturday afternoon, then ultimately resolved the last position traded before his assassination. This meant that many people who purchased “yes” transactions did not receive the payouts they were hoping for. Kalshi refused to comment on the incident.

After the first round of criticism on Saturday, Kalshi CEO Tarek Mansour noted on social media that Kalshi’s settlement still included a “death exclusion” for markets as to when executives would leave office. In the United States, derivatives markets are not legally allowed to offer assassination contracts. But Kalshi had only added a notice about the exclusion to the market’s webpage after the attack on Iran began, meaning some traders had not seen it. The reaction came quickly. (Sample online comment: “You have literally ruined the entire credibility of your company.”) Some traders threatened class action lawsuits and said they had filed complaints with the Commodity Futures Trading Commission, the government agency that oversees prediction markets.

On Sunday, Mansour stressed that Kalshi had taken a financial hit in an attempt to resolve the issue and pledged to ensure no one lost money. “Kalshi suffered a substantial loss to make users whole,” he wrote in a lengthy apology. “I’m sorry for the disappointment. We will get better, thanks for putting up with us,” he wrote. In the future, Mansour says, Kalshi will make changes to more prominently highlight death exclusions in similar markets. A source at Kalshi told WIRED that the company lost approximately $2.2 million due to the incident.

Mansour’s apology did not satisfy some critics. “I canceled my account and deleted the app,” Mahoney told WIRED. “They should have fixed the market the way people thought it would be fixed.”

Although this was the largest war-related prediction market resolution conflict, it was not the only one. Some traders have also criticized Polymarket for its approach to a number of markets regarding the events in Iran. How prediction markets handle sensitive contracts tied to global events is an ongoing issue in the industry. Last year, for example, traders protested how Polymarket resolved a popular bargain over whether Ukrainian President Volodymyr Zelensky, known for his casual outfits, would wear a suit by a certain date.

The controversy over Iran war contracts comes at a time when prediction markets are already under increased regulatory scrutiny. A growing bipartisan movement in the United States is calling for stricter regulation of platforms, and Kalshi alone faces 19 separate lawsuits from state authorities. This week, former Trump chief of staff Mick Mulvaney also launched an advocacy group called Gambling Is Not Investing, aimed at pushing for more safeguards in the industry.

Despite the recent turmoil, enthusiasm around prediction markets remains high. Traders eager to continue predicting what will happen in Iran are in luck: Kalshi has an idea of ​​Khamenei’s successor. Millions of dollars are already at stake.