Prediction Market Contracts Tied to Iran War Sow Confusion—and Frustration

Key Takeaways

• Kalshi this week said it voided an event contract linked to the removal from power of Iran’s Supreme Leader Ali Khamenei’s, in order to comply with CFTC regulations.
• Polymarket’s international platform, which isn’t subject to CFTC rules, paid out on a similar contract, meaning some people profited from Khamenei’s death.
• The confusion underscores how complicated some event contracts can be to settle.

Any bet goes on prediction markets, but death complicates the trade.

Folks who placed bets linked to the fate of Iran Supreme Leader Ali Khamenei, and were set to profit handsomely, were caught off guard when the trade didn’t immediately settle following the weekend strikes on the country, and its leader’s subsequent death. Prediction market operator Kalshi effectively voided the contract.

Kalshi CEO Tarek Mansour took to social media to address those “frustrated about the Khamenei market,” explaining that the Commodity Futures Trading Commission disallows folks from directly profiting on “war, assassination, terrorism, or other violent outcomes.”

On rival Polymarket’s international venue—where the CFTC’s rules don’t apply—bettors had to wait for a similar contract to be resolved amid user disputes about when exactly the Iranian leader was declared “out.” Polymarket eventually settled the trade to the affirmative. One winning bettor would appear to have made over $123,000 on the “Khamenei out” contract.

Event contracts linked to geopolitical events, as popular as they are with regular folks and institutions alike, are generating fresh drama. Earlier this year, someone profited handsomely from an unlikely bet on the removal of Nicolás Maduro as Venezuela’s president, raising questions on whether insiders were using misappropriated information for personal gain. Now, issues stemming from event contracts linked to recent current events show how complicated they can be to settle.

WHY THIS MATTERS TO YOU

Prediction markets have become a popular venue for regular folks to trade on everything from U.S. elections and company earnings to sporting events and geopolitical tensions. Their popularity is now drawing undesirable attention, with some lawmakers keen on policing them for things like insider trading and profiting on violence.

“As an exchange, we resolve the market according to the rules, even when there is disagreement with the resolution,” Mansour wrote on X, adding that the platform would reimburse fees, that contracts would be settled to the last traded price before the announcement of Khamenei’s death, and that it would “improve” by changing how similar contracts were presented so that traders better understand the terms.

Mansour’s missive drew a range of responses: Some posted screenshots of their losses, while others observed that there are users who don’t “care to read” the rules, “then cry about it.” Some responded in anger at the voiding of the contract, with one arguing that “the title and description of the market would lead any reasonable person to believe that death counted.”

Senator Chris Murphy (D-Ct.), on social media, vowed to introduce legislation “ASAP” to “ban” such event contracts in response to another tweet that suggested a group of insiders were poised to collectively make a $1.2 million profit betting on the Iran strikes.

Murphy’s reaction follows on the heels of a letter six other democratic senators sent to the CFTC last week expressing concern about contracts “that incentivize physical injury or death, and the grave and perverse moral and geopolitical implications” of them and asked the regulator to clarify that those were not allowed.

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Meanwhile, contracts related to Iran—who the next leader will be, whether the Iranian regime will fall, when the country will close the Strait of Hormuz, and whether other countries including France, the United Kingdom, or Germany would strike Iran by the end of the month—continue to trend.

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