Kalshi, a New York–based prediction market, is facing a proposed class action after traders say the company refused to pay roughly $54 million on a contract that asked whether Iran’s supreme leader would leave office by March 1. According to the complaint, Kalshi invoked a previously undisclosed "death carveout" only after reports emerged that Ayatollah Ali Khamenei had been killed, then settled the market at pre-death prices instead of paying the $1-per-contract that winning "yes" traders say they were owed. The lawsuit also claims Kalshi allowed trading to continue while reports of strikes were circulating, pulling in additional "yes" bets that plaintiffs say were later shortchanged.
The suit, Risch v. KalshiEX LLC, was filed Thursday in the U.S. District Court for the Central District of California and names Adam Risch and Yonatan Gliksman as lead plaintiffs, according to Bloomberg Law. The plaintiffs argue they are entitled to full "yes" payouts and are seeking compensatory and punitive damages, disgorgement, and court orders requiring clearer disclosures. The complaint characterizes the contract language as "clear, unambiguous and binary" and says Kalshi’s handling of the outcome did not match what users were told.
Kalshi has pushed back, saying its rules did not change and that the exchange "included every precaution ... to make sure people could not trade on the outcome of death." A company spokesperson said Kalshi "reimbursed all fees and net losses out of pocket — to the tune of millions" so that no customer "ended net-negative," according to Reuters. CEO Tarek Mansour has publicly defended the carveout on X and said Kalshi would improve how such exceptions are highlighted to traders, and one reporting source estimated the reimbursements cost the company roughly $2.2 million, as reported by The Washington Post.
Rule Changes and the CFTC Filing
In the days following the controversy, Kalshi submitted a March 2 rulebook amendment to the Commodity Futures Trading Commission that formally adds a "death caveat" to its playbook. The filing and related industry reporting describe a provision that allows Kalshi to settle a market at the last traded price if the primary subject of a contract dies. The company says this is not a new escape hatch but simply a formal codification of an existing practice, according to DeFi Rate.
Legal Implications
The lawsuit accuses Kalshi of breach of contract, deceptive business practices, and violations of California law, and it claims that the late invocation of the carveout misled ordinary users about how the market would be resolved. The plaintiffs ask the court to compel full $1-per-contract payouts and to require clearer, more prominent disclosures of any special exceptions, according to Bloomberg Law. If the case survives early procedural challenges, it could test how much protection federal regulation gives exchanges against state-law claims and influence how U.S. platforms design and describe geopolitically sensitive markets.
Traders, Markets and What Comes Next
The named plaintiffs say their own exposure in the Khamenei contract was relatively small, roughly $260 combined. Even so, the disputed market reportedly saw more than $54 million in trading volume, which helps explain how a spat over contract wording turned into a high-stakes proposed class action, according to Decrypt. Judges in the Central District of California will now decide whether Kalshi’s death carveout was a valid, disclosed market term or, as plaintiffs claim, an after-the-fact dodge. Industry lawyers and the CFTC are watching closely to see where that line gets drawn.
