Kalshi faces a class action lawsuit seeking $54 million in payouts after invoking a 'death carveout' clause to avoid paying customers who bet Iranian Supreme Leader Ayatollah Ali Khamenei would leave office before March 2026. The lawsuit alleges the company knew customers were betting on Khamenei's death given the volatile geopolitical situation and military tensions with the U.S.

Khamenei was killed in U.S.-Israeli strikes that killed hundreds, including top Iranian officials. The lawsuit claims Kalshi's actions were 'deceptive' and 'predatory,' arguing the market's language about how Khamenei would leave office was 'clear, unambiguous and binary.' Customers were drawn to the 'Khamenei Market' due to the fluid circumstances surrounding the 85-year-old autocratic leader.

Kalshi CEO Tarek Mansour defended the death carveout provision, saying it 'keeps the rules simple,' and promised to reimburse all fees from the Khamenei market. The case was filed in U.S. District Court for the Central District of California. This controversy highlights growing scrutiny of prediction markets, which have exploded in popularity since the 2024 U.S. election when their real-time probabilities proved more accurate than traditional polling.