Kalshi "Iran Leader Resignation" $50 Million Prediction Contract Settles Controversy! CEO: Rejecting Death Arbitrage

The death of Iran’s leader sparks controversy in prediction markets; Kalshi refunds $2.2 million, with the CEO claiming they refused “death arbitrage.” Before the airstrike, U.S. lawmakers demanded strict scrutiny of contracts related to war and assassination predictions, with a deadline to respond by March 9.

Kalshi’s “Khamenei Resignation” Prediction Contract Sparks Debate

Following the joint U.S. and Israeli airstrikes that resulted in the death of Iran’s Supreme Leader Ali Khamenei, Kalshi CEO Tarek Mansour stated that their platform’s trading volume exceeded $50 million on contracts related to the event. He emphasized that their goal was to prevent investors from profiting from the death.

The contract was titled: “Will Khamenei step down as Iran’s Supreme Leader?” with rules stating that if Khamenei dies, settlement would be based on the last trading price before death. When news of Khamenei’s death broke, a surge of funds flooded into the contract, and Kalshi suspended trading due to settlement chaos.

Kalshi later admitted that the settlement terms contained ambiguous language and ultimately decided to refund users’ net losses. Sources told Bloomberg that this move cost the platform about $2.2 million.

Kalshi’s Promotion and Settlement Standards Under Fire

After Kalshi processed refunds, criticism emerged within the community, mainly because Kalshi had promoted this contract at the time of the event. Last Saturday morning, news of Khamenei’s death began circulating, Kalshi posted on X: “Breaking: The probability of Khamenei no longer serving as Iran’s Supreme Leader has surged to 68%,” which Mansour also retweeted.

Image source: X

Former SEC Chief of Staff Amanda Fischer criticized this, saying Kalshi’s actions were akin to providing a marketplace for assassination proxies.

Users also criticized Kalshi’s settlement standards, pointing out that when Jimmy Carter passed away, the platform settled his contract as “no,” accusing the platform of only applying special terms when losing money.

Dennis Kelleher, CEO of Better Markets, stated that Kalshi’s actions reveal an attempt to balance expanding trading volume with avoiding clear laws banning assassination-related bets.

Prediction Markets Cross the Line, U.S. Lawmakers Call for Investigation

Prediction markets are often seen as “anything can be traded,” but this incident highlights their limits. Before the U.S.-Israel airstrikes on Iran, California Democratic Senator Adam Schiff sent a letter to CFTC Chair Michael Selig demanding strict regulation of contracts related to war and assassination, with a response deadline of March 9.

Connecticut Democratic Senator Chris Murphy also announced he is drafting legislation to ban such market contracts to prevent insider trading and manipulation based on known outcomes. The Kalshi settlement controversy proves that such betting markets should not exist.

Polymarket’s Wordplay Sparks Controversy

Compared to Kalshi, Polymarket still hosts 187 Iran-related markets. One of these predicts whether the U.S. will forcibly remove Khamenei before March 31. Polymarket ultimately settled this contract as “no,” reasoning that the U.S. only contributed or assisted in the killing, which sparked strong dissatisfaction among some commentators and calls for dispute resolution.

Because Polymarket relies on blockchain-based decentralized settlement mechanisms, the fairness of contract judgments remains under scrutiny.

On-chain data shows that, hours before the airstrike, six anonymous wallets collectively bet on “U.S. attacking Iran before February 28,” ultimately earning about $1.2 million. These wallets were almost all newly created accounts in February, with funds transferred within 24 hours before the event. Such suspicious trading patterns have raised concerns about military secrets leaking and potential on-chain insider arbitrage.

Related report:
Pre-airstrike prediction? Polymarket traders bet on US-Iran war, earning $1.2 million, sparking controversy