Kalshi sued by traders over disputed Khamenei prediction market payout fight
Two California traders have filed a federal class action lawsuit accusing prediction market operator Kalshi of misleading users and refusing to pay contracts tied to the reported death of Iran’s Supreme Leader Ali Khamenei.
The complaint, reviewed by ReadWrite and filed March 5 in the U.S. District Court for the Central District of California, says the platform ran a market asking whether Iran’s supreme leader would leave office before certain dates, then changed how the contracts were settled after the triggering event occurred. According to the complaint, thousands of traders believed they had winning positions but never received the full payouts they expected.
Plaintiffs Adam Risch and Yonatan Gliksman say they bought “yes” contracts in a market titled “Ali Khamenei out as Supreme Leader?” which launched on Kalshi in early January 2026. The market summary visible to users said the contract would resolve to yes if Khamenei left office before March 1, 2026.
Traders believed that condition was met on February 28, 2026, when U.S. and Israeli strikes reportedly killed the Iranian leader. As news spread across media and social platforms, many users expected the market to settle in their favor.
Instead, the complaint says Kalshi halted trading and later announced the contracts would not resolve to “yes.” The platform ultimately settled positions using what it described as the last traded price before news of the death circulated.
The plaintiffs say that decision dramatically reduced what traders received.
Kalshi Khamenei lawsuit centers on little-known contract settlement clause
The case focuses on a provision the company calls a “death carveout.” Kalshi relied on that clause to argue that if a leader leaves office solely because of death, the market should not resolve normally. Instead, payouts are determined using the market’s last traded price prior to the death.
Risch and Gliksman argue ordinary users never saw that rule and say the platform lured retail traders with the promise of straightforward payouts if their predictions were correct. The complaint describes the situation as an example of consumers being invited to buy event contracts on real-world developments only to have the terms changed once the outcome favored traders.
“This case exposes a predatory scheme to exploit retail consumers in the emerging prediction market industry,” the lawsuit states, accusing Kalshi of inviting users to purchase contracts tied to real-world events and promising payouts when those predictions prove correct.
But the filing argues the platform ultimately decided “when, whether, and how much to pay” after the outcome occurred, despite the terms traders believed applied when they executed their trades. It adds that the dispute illustrates “unfair competition, deceptive corporate behavior, and consumer fraud,” alleging the company attracted users with clear promises before effectively pulling those promises back.
The lawsuit also claims the company relied on a contractual exception that most users never saw. According to the complaint, the so-called death carveout appeared, if at all, in deeper contract documentation rather than in the rules summary traders relied on when buying contracts.
“The ‘death carveout’ upon which Defendants relied was not adequately disclosed to consumers,” the complaint continues.
The filing argues that even if the clause existed somewhere in Kalshi’s internal rules or formal contract terms, it was not included in the user-facing explanation of how the market would resolve. It also notes that the company later acknowledged that earlier disclosures were “grammatically ambiguous.”
According to the complaint, Kalshi continued accepting trades and promoting the market on social media as news about possible military strikes spread online. The plaintiffs say that activity drew additional traders into the market without clarifying the death-related exception.
Overall trading volume in the market reached roughly $54 million.
“Defendants’ conduct was deceptive, predatory, and [exemplifies] unfair business practice,” the lawsuit claims, adding that the large trading volume “reflects the massive scale of Defendants’ deceptive conduct.”
The lawsuit seeks class action status for U.S. traders who held “yes” positions when trading stopped and asks the court for damages equal to the full payouts they say the contracts promised. Plaintiffs are also seeking restitution, punitive damages, and changes to how Kalshi discloses market rules.
Featured image: Kalshi / Grok / Canva
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