A proposed class action lawsuit now targets prediction market Kalshi after traders disputed payouts tied to bets on Ali Khamenei leaving office. The complaint, filed in the U.S. District Court for the Central District of California, followed reports of U.S. and Israeli airstrikes during the Iran War. Traders claim the platform halted a $54 million market while refusing expected payouts.
Iran War Market Dispute Draws Legal Challenge Against Kalshi
The lawsuit centers on a prediction contract asking whether Khamenei would leave office by specific deadlines before the Iran war even began. Trading volumes on the market reached about $54 million before the exchange halted activity on Feb. 28.
According to Bloomberg Law, traders argued the contract language promised full payouts if the Iranian leader exited the role. However, the platform later referenced a “death carveout” that excluded outcomes linked directly to a death.
Plaintiffs say Kalshi did not clearly disclose that exception when traders initially entered positions. Instead, they claim the rule appeared prominently only after reports of airstrikes in the Iran war began circulating.
Notably, traders say the platform allowed activity to continue while reports of strikes spread on Feb. 28. As a result, more participants reportedly placed “yes” positions expecting payouts if Khamenei left office on the Iran war.
This lawsuit comes days after CoinGape reported that Kalshi had fined a MrBeast associate over insider trading. The lawsuit argues that both traders and the platform understood the most realistic path for departure involved death. At the time, military tensions around Iran had escalated fast
Traders Adam Risch and Yonatan Gliksman Lead Lawsuit
Two traders, Adam Risch and Yonatan Gliksman, filed the proposed class action. The law firm Novian & Novian LLP represents them in the California federal court. Their proposed class includes U.S. traders who held “yes” positions across any expiration date when trading stopped.
Notably, this is not the only lawsuit against the prediction market, as it is facing another in Oregon for operating an “illegal online gambling enterprise” in violation of Oregon law that appeared even before the Iran war began.
Those contracts speculated on departure deadlines ranging from March 1 to later months. The plaintiffs seek damages and restitution tied to the halted market. They also request court orders requiring Kalshi to improve disclosure practices for similar markets.
Additionally, the complaint alleges breach of contract and violations of California law. It also demands the return of what plaintiffs describe as ill-gotten gains.
CEO Response and Broader Scrutiny of Prediction Markets
Following the controversy, Kalshi chief executive Tarek Mansour addressed the dispute. He stated the platform does not offer markets directly tied to a person’s death. However, criticism continued. Mansour later announced the company would reimburse fees and net losses connected to the disputed market.
He acknowledged traders felt the rules lacked enough visibility. Therefore, Kalshi decided to reimburse losses from the market out of pocket. The company also said it would update how similar contracts present death-related exceptions. Future listings, according to Mansour, will show those rules more clearly before trading begins.
Meanwhile, prediction markets face increasing regulatory attention across the United States. Several states argue event contracts resemble gambling under state law. By contrast, the federal regulator Commodity Futures Trading Commission treats these products as derivatives contracts. The agency has already filed an amicus brief to assert its jurisdiction over prediction markets.
Amid the Iran War, Kalshi has listed the odds on a possible U.S.–Iran nuclear agreement. Traders estimate a 46% chance of a deal before 2027. They also place the probability at 35% before August and 9% before April.
Source: Kalshi
Source: https://coingape.com/prediction-market-kalshi-faces-class-action-over-iran-war-linked-bets/
