Kalshi Traders Report Losses on Khamenei Market Despite CEO's Full Refund Pledge

Prediction market platform Kalshi paused and settled its contract titled "Ali Khamenei Out as Supreme Leader?" on February 28, 2026, after reports of the Iranian Supreme Leader's death in U.S.-Israeli strikes — resolving all pre-death positions at the last traded price before confirmed reporting of death at 1:14 a.m. ET. CEO Tarek Mansour pledged full refunds of trading fees and full reimbursement for positions entered after death, declaring "no user will lose a dollar in this market." Traders holding "Yes" positions acquired at elevated prices before the halt — as the market priced in the strikes — disputed that characterization, reporting real net losses on settled contracts.

CEO Tarek Mansour — X, February 28, 2026

"No user will lose a dollar in this market." — Kalshi refunded all trading fees across the market and reimbursed the cost of entry for positions opened after death was reported. Pre-death positions were settled at the last traded price before 1:14 a.m. ET per published contract rules.

Kalshi Khamenei Market — Key Facts

•Market "Ali Khamenei Out as Supreme Leader?" — Kalshi
•Status Paused under Rule 13.1, then settled
•Settlement basis Last traded price before confirmed death (1:14 a.m. ET, Feb 28, 2026)
•Volume $21.7 million across related Khamenei contracts — Kalshi
•CEO Statement Tarek Mansour (X post, Feb 28) — "No user will lose a dollar in this market"
•Fee refund All trading fees refunded platform-wide for the market
•Post-death entry Positions opened after death fully reimbursed for entry costs
•Pre-death losses Settled at last traded price — net losses for "Yes" holders bought at higher prices
•Rule cited CFTC prohibits direct death markets; Kalshi policy bars profiting from individual deaths
•Polymarket Resolved Yes after death confirmation — $45M on one contract; $529M+ across Iran markets

1. Contract Rules and Settlement Mechanism

Kalshi's published contract rules governed the settlement outcome directly. The contract's death-specific clause — requiring resolution at the last traded price before confirmed reporting of death — was central to both the settlement logic and the trader complaints that followed.

Contract Rules — Published Terms

•Before Feb 1, 2026: Outcome defaults to No.
•Leaves office by Feb 1: Resolves to Yes.
•Death-only departure: Market resolves at last traded price before confirmed reporting of death.
•Price unavailable: Outcome Review Committee determines fair allocation.
•Rule 13.1: Trading paused pending review after death reports circulated.

Trading paused under Kalshi Rule 13.1 as death reports circulated, pending a formal review. Settlement was then executed at the last price prior to the 1:14 a.m. ET confirmed-death timestamp. For traders who bought "Yes" contracts before the halt — as the market rose in response to strike reports but before the official cutoff — the settlement price was below their entry cost, producing a net loss that fee refunds did not cover.

Rule Design Note

The death-departure clause was written to prevent Kalshi from operating a direct death market, consistent with CFTC regulations prohibiting contracts tied to individual deaths. The last-price mechanism was intended to neutralize the death event's effect on settlement — but in practice, rapid post-strike price movement before the halt created a mismatch between final settlement and trader expectations.

2. Trader Losses and Complaints

Market Scale

$21.7M

Volume across Kalshi Khamenei-related contracts

$45M

Polymarket volume — single Khamenei variant

$529M+

Polymarket total Iran-related market volume

1:14 a.m.

ET timestamp — Kalshi settlement cutoff (Feb 28)

Users holding "Yes" positions purchased at elevated prices in the window between initial strike reports and Kalshi's halt reported effective losses when settled at earlier pre-cutoff prices. The complaint structure fell into two groups:

Trader Complaint Categories

•Pre-death "Yes" holders: Bought after strike reports pushed prices up, settled below entry. Fee refund did not cover capital loss. Described by traders as being "cheated out of gains."
•Post-death entries: Fully reimbursed for entry cost per CEO pledge — no capital loss on these positions.
•Rule clarity dispute: Some traders argued the market functioned as a de facto death contract despite published rules, per Business Insider reporting.
•Platform response: Kalshi committed to additional reimbursements for value lost due to rule clarifications, and to improvements following the event.

3. CEO Ethics Position and Refund Scope

Tarek Mansour defended the settlement in statements via X and through platform communications, reiterating that Kalshi's policy opposes profiting from individual deaths. He framed the original market as addressing broad leadership transition — noting potential non-violent departure paths existed when the contract was listed.

Refund Coverage — CEO Commitment

•Trading fees: Fully refunded — platform-wide for all participants in the market.
•Post-death positions: Entry costs fully reimbursed.
•Pre-death rule-clarification losses: Additional reimbursements committed as a customer service measure.
•Capital losses (pre-death, pre-halt "Yes"): Not covered — settled at published last-price mechanism per contract rules.

Platform Policy

Kalshi stated explicitly that no markets directly tied to individual deaths are listed on the platform, and that contract design prevents profiting from such events. The CFTC framework under which Kalshi operates as a regulated exchange prohibits death-contingent binary contracts — a structural constraint that differentiated Kalshi's settlement from Polymarket's binary Yes resolution.

4. Kalshi vs. Polymarket — Regulatory Divergence

The contrast between Kalshi's settlement and Polymarket's outcome illustrates how regulatory status shapes contract design and resolution in prediction markets covering the same geopolitical event.

Kalshi vs. Polymarket — Settlement Comparison

•Kalshi resolution: Last traded price before confirmed death (1:14 a.m. ET) — per CFTC-compliant death-clause design. Not binary.
•Polymarket resolution: Resolved Yes after death confirmation — binary payout. Unavailable to U.S. users.
•Kalshi volume: $21.7M across Khamenei-related contracts.
•Polymarket volume: $45M on one variant; $529M+ across all Iran-related markets.
•U.S. access: Kalshi — regulated, available to U.S. traders. Polymarket — not available to U.S. users.
•Regulatory constraint: Wall Street Journal reported Kalshi's CFTC status barred direct death markets, requiring last-price settlement rather than binary Yes/No.

When a prediction market settles on the price before death but traders bought expecting the death, the only thing refunded faster than fees is the illusion of certainty.