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Recent US and Israeli strikes targeting Iran have triggered public backlash, protests and intense political discourse. They have also exposed a controversial edge case for the rapidly growing prediction-market industry. Platforms such as Polymarket and Kalshi offer event contracts tied to geopolitical events, allowing traders to speculate on outcomes ranging from elections to international conflicts.
The military escalation in Iran has raised uncomfortable ethical questions about trading on violence, particularly when contracts involve specific individuals such as Iran’s supreme leader, Ayatollah Ali Khamenei. Markets tied to leadership changes or conflict outcomes can indirectly hinge on whether a person lives or dies, placing prediction platforms in a difficult position.
The core issue: ‘Death markets’
Prediction-market platforms like Kalshi—a US-regulated exchange overseen by the Commodity Futures Trading Commission—and Polymarket, an offshore crypto-based platform that operates widely internationally but only offers sports markets in the US, have long offered geopolitical markets.
As tensions escalated in the Middle East, trading activity surged across both platforms, highlighting how quickly real-world crises can translate into speculative financial activity.
Both Kalshi and Polymarket have multibillion-dollar valuations, putting them firmly in the spotlight as prediction markets experience explosive growth and increasing mainstream attention. Kalshi is valued at approximately $11 billion, while Polymarket has reportedly reached a $9 billion valuation. With that growth has come heightened scrutiny, especially around so-called “death markets.”
Contracts tied to the Iran strikes did not explicitly ask whether Khamenei would die. Instead, the markets were structured around political outcomes, such as whether he would remain the supreme leader of Iran by a specific date and time.
Kalshi’s market, for example, asked: “Ali Khamenei out as Supreme Leader?”
In practice, Khamenei’s death would resolve that market as a “yes.” However, the platform included special settlement rules designed to prevent traders from directly profiting from a death event. Critics nonetheless condemned the markets, arguing they monetize human suffering and risk creating ethically troubling incentives while violence unfolds in real time.
Kalshi CEO responds to backlash over Khamenei market
Following Khamenei’s death, backlash intensified across social media and within the prediction-market community. Kalshi CEO Tarek Mansour addressed the controversy publicly on X.
“We don’t list markets directly tied to death,” Mansour wrote. “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.”
Mansour acknowledged the divide in the community: “I know some of you disagree and prefer that we list these markets without a death carveout because it keeps the rules simple and because many traditional markets, like oil futures, can be proxy markets for war and death. But we believe that’s different than having a market directly settling on someone’s death, which is not allowed for U.S.-regulated entities.”
Mansour explained the platform’s “death carve-out” rule, designed to ensure contracts cannot settle purely based on a death event. Instead, markets must resolve based on broader geopolitical outcomes. In other words, Kalshi’s rules attempt to separate political forecasting from explicit speculation on a person’s death.
For the Khamenei market specifically, Kalshi announced it would:
- Reimburse all trading fees associated with the market.
- Pay out positions entered before Khamenei’s death at the last traded price before the news broke.
- Refund the cost of entry for positions opened after Khamenei’s death.
Balancing forecasts with public ethics
This controversy arrives at a challenging moment for the industry. Kalshi, Polymarket and other platforms are defending the legitimacy of their products in multiple jurisdictions as regulators debate where these markets fit within gambling and financial laws.
Kalshi has approval from the CFTC, making it the only federally regulated prediction-market exchange in the United States. However, several states have issued cease-and-desist orders, arguing that Kalshi’s sports-related contracts function as unlicensed sports betting products instead of financial derivatives. Polymarket, meanwhile, has been gradually re-entering the US conversation following a 2022 settlement with the CFTC over unregistered derivatives trading.
Other companies are exploring similar products. Sports betting operators FanDuel, DraftKings and Underdog now offer dedicated prediction platforms, focusing on states without legal sports betting options.
Supporters say these platforms aggregate information to produce valuable real-time forecasts. Opponents warn that markets tied to violence or the fate of individual leaders raise serious ethical questions. Whether prediction markets evolve into accepted forecasting tools or face tighter restrictions may depend on how the industry handles these moral intersections.
