Kalshi is facing potential class-action lawsuit following its decision to settle the “Iran Supreme Leader” market at the last traded price, a move that has ignited intense regulatory and insider trading scrutiny.
Updated on March 3, 2026, former New York legislator Ben Geller is currently organizing a potential lawsuit. In a post on X, Geller revealed he has hired a legal team and PR firm, claiming that “tens of thousands” of users were impacted. He further alleged “fraud and market manipulation,” stating intent to target individual executives and staff personally.
What Triggered the Controversy Prediction market giants like Polymarket and Kalshi offered contracts on when Iran’s Supreme Leader, Ali Khamenei, would be out of power. Following the announcement of his death on March 1, many expected a “Yes” payout.
However, Kalshi’s rules explicitly exclude death as a trigger for a standard $1.00 resolution. Instead, the market resolved at the last traded price before the death.
While Kalshi refunded all fees and reimbursed $2.2 million in trading losses, widespread outrage remains, and hence, the class-action lawsuit. Bloomberg’s Matt Levine argued that selective enforcement of rules undermines the platform’s credibility.
“Selective enforcement of the regulatory framework undermines Kalshi’s claim that it strictly follows the rules,” Levine noted, adding that the dynamic could support an argument for “misleading market design”.
Attempts to Clarify the Situation Kalshi CEO Tarek Mansour reiterated that the platform follows a core policy of not profiting from death. He stressed that the death exception was included from “day one” and that paying “Yes” holders would have cheated “No” holders.
Broader Political and Regulatory Fallout The incident comes at a sensitive time. Critics argue that prediction sites such as Kalshi should not offer markets on violent geopolitical events. Lawmakers are questioning if such events create opportunities for insider trading. Blockchain firm Bubblemaps identified six accounts that reportedly generated $1.2 million in profit on Polymarket just hours before strikes in Iran.
Senator Chris Murphy alleged that individuals close to the administration were “profiting from the conflict” and plans to introduce legislation.
Kalshi is facing yet another class-action lawsuit in Alabama, this time, for allaged illegal sports betting.
