Khamenei Markets Show Evolving Guardrails on Prediction Markets

The Iran strikes and the Supreme Leader’s death created a cascade of headaches for the prediction market industry.

After the United States struck Iran on Saturday, Kalshi resolved its market on whether Ali Khamenei would be “out” as Supreme Leader. Kalshi resolved the market at the prices traded before Khamenei’s death in the early hours of Saturday morning ET. The exchange’s market rules read:

“If <leader> leaves solely because they have died, the associated market will resolve and the Exchange will determine the payouts to the holders of long and short positions based upon the last traded price (prior to the death). If a last traded price is not available or is not logically consistent, or if the Exchange determines at its sole discretion that the last traded prices prior to death do not represent a fair settlement value, the Outcome Review Committee will be responsible for making a binding determination of fair allocation.”

Kalshi faced backlash for not resolving the market to ‘Yes’ since Khamenei was indeed removed from power. Tarek Mansour, Kalshi’s CEO, posted on X:

“We don’t list markets directly tied to death. When there are markets where potential outcomes involve death, we design the rules to prevent people from profiting from death. That is what we did here.“

After Jimmy Carter died, his market on whether he would attend Donald Trump’s inauguration resolved to ‘No.’ Kalshi also closed and refunded its contracts on Charlie Kirk running for president after his assassination about nine months after Carter’s death.

Kalshi’s crypto rival, Polymarket, had its own issues with its Iran market.

Polymarket didn’t see Khamenei’s removal coming

Polymarket resolved its market on whether Khamenei would be removed from power to ‘Yes.’

The platform’s market on whether Khamenei would be removed by Feb. 28 was trading at 2% on the night before he was killed.

While the U.S. military buildup near Iran was public information, the strikes themselves were classified. That information does not appear to have been used to profit unfairly in this market.

The publicly available information may have implied a 2% chance of Khamenei’s removal from power. However, that highlights the greatest limitation of prediction markets. They can only aggregate information available to traders.

Protecting operational integrity is more important than markets on military operations or leadership changes. That balancing of values raises questions that prediction markets have only just begun to reckon with.

Some markets more valuable than others

Prediction market platforms have been offering new types of markets on more events throughout 2025. The platforms are now defending their gains in court.

The courts could make prediction market platforms limit markets on topics like sports or elections. A future CFTC will likely create rules eliminating certain markets.

However, the prediction market industry will also have to confront which markets are worth having up and which are not sufficiently valuable hedging or forecasting tools to list.

Polymarket closed its market on the arrest of Nancy Guthrie’s kidnapper “out of respect for those involved” in the case itself. Kalshi has adjusted to refund contracts won by death, though that standard emerged in later cases.