Pricing the Death of the Iranian Leader: Where Are the Ethical Boundaries of Market Prediction?

Iran has become the focus of the world. On February 28, the United States and Israel launched a large-scale military strike against Iran, attacking approximately 30 targets within Iran, including the presidential palace. Iran's Supreme Leader Ayatollah Khamenei was confirmed dead in the attack. In this attack, prediction markets once again demonstrated their intelligence value, distinct from traditional channels. Hours before the airstrike, market probabilities surrounding whether the US would attack Iran had significantly increased, and on-chain monitoring showed large bets from new addresses—in such globally significant public events, prediction market volatility once again outpaced mainstream media coverage. This should have been a moment for prediction markets to declare victory, similar to the 2024 presidential election, but Khamenei's death has plunged the industry into a major debate about ethical boundaries. Does Death Count as Resignation? From a micro perspective, the crux of the conflict lies in whether Khamenei would step down as Iran's Supreme Leader. As the most closely watched development in the Iranian situation, leading betting platforms like Kalshi and Polymarket had long offered betting options on the event on their platforms. However, the way (or rather, the speed) Khamenei ended his rule clearly surprised everyone. After Khamenei's death was confirmed, Kalshi CEO Tarek Mansour was the first to express his opposition to profiting from an individual's death on social media. "We will not list markets that are directly linked to death. When a market is likely to result in death, we will design rules to prevent people from profiting from death." Given that the death is a fait accompli, Kalshi will take the following actions regarding the "Khamenei's resignation as Supreme Leader" event: All transaction fees for that market will be refunded; the market will be settled based on the last traded price before the confirmation of Khamenei's death, and all positions, regardless of when they were opened, will be settled at that price; if users opened positions after Khamenei's death, Kalshi will fully compensate for the difference in costs.

Opening the relevant event page on Kalshi shows that the event has been suspended and specially marked by Kalshi. Kalshi also noted that "because the market outcome is not a simple YES or NO, it pays out based on its fair value."

Kalshi's approach has sparked heated discussions in the community.

• Supporters of Kalshi believe that avoiding "death"-related events aligns with mainstream values ​​and regulatory constraints on commodity contracts (the current regulatory framework for predicting market events).

  • Those who support Kalshi believe that avoiding "death"-related events aligns with mainstream values ​​and regulatory constraints on commodity contracts (the current regulatory framework for predicting market events).

    Especially considering that prediction markets have already demonstrated a certain degree of repercussions on the real world, without boundaries, prolonged betting could indirectly incentivize "physical harm or murder," leading to the gradual dark web transformation of prediction markets. Opponents of Kalshi argue that this action undermines the original fairness of prediction market transactions and diminishes its hedging value against dramatic changes in reality—those who bet on YES did not receive the expected returns; although Tarek Mansour claims that "no user will lose even $1 in this market," in reality, those who bet on NO and stopped their losses early did not receive corresponding compensation. In contrast, Polymarket has not yet made any statement on the matter, and trading continues normally. Currently, the price of YES shares that were delisted before March 31st is temporarily quoted at 99.9 cents, and NO at 0.2 cents.

    

    In the rules for judging this incident, Polymarket has stated that "if Khamenei resigns, is detained, or otherwise loses his position or is unable to fulfill his duties as the Supreme Leader of Iran within the time limit stipulated by the market, he will be deemed to have been removed from office," which seems to cover the unexpected death situation. However, disputes still arose in the settlement process—clearly, there are disagreements within the community.

    • Odaily Note: For details on Polymarket's adjudication mechanism and the handling process after disputes arise, please refer to "Who 'Defines the Facts'? The Truth of Power and the Space for Evil in Polymarket's Adjudication Mechanism."

      Odaily Note: For details on Polymarket's adjudication mechanism and the handling process after disputes arise, please refer to "Who 'Defines the Facts'? The Truth of Power and the Space for Evil in Polymarket's Adjudication Mechanism."

    Calls for a Regulatory Ban

    The debate surrounding whether prediction markets should include events related to "personal death" had already begun on the regulatory side long before Khamenei's death garnered widespread attention.

    On February 24, days before Khamenei's death, six Democratic senators, including Adam Schiff, jointly wrote to Michael Selig, Chairman of the Commodity Futures Trading Commission (CFTC), requesting the CFTC to classify and prohibit any prediction market contracts that use personal death as a settlement condition or are highly correlated with personal death.

    The legal basis cited in the letter is that, under federal commodity regulations, the CFTC has already "classified and prohibited" contracts involving or mentioning terrorism, assassination, war, or similar activities.

    Adam Schiff and others stated that such events could incentivize "physical injury and even death," and even pose a "dangerous national security risk"—"These contracts may incentivize real-world harm because they establish economic rewards for turbulent events or physical injury, and encourage actors to influence or facilitate these outcomes for personal gain." The CFTC did not immediately respond publicly to the letter. A few days later, news of Khamenei's death quickly made headlines, and Kalshi and Polymarket were caught in a media storm even before regulators had a clear stance. Free Markets vs. Social Responsibility: Prediction markets offer a new path to using market mechanisms to predict the probability of future events, but this does not mean that prediction markets are suitable for all events. From the perspective of the prediction market's operation, platforms tend to list events with clearly defined outcomes and less susceptible to manipulation by a single point of contact, to avoid disputes over the interpretation of terms or fairness. However, from the perspective of external influences and regulatory pressure, prediction markets need to avoid events that contradict mainstream values—if the very structure of a prediction market leads people to disrupt social order or harm others for profit, it easily faces ethical and legal challenges. The debate surrounding whether to ban events related to "death" is essentially a divergence of inclinations towards free markets versus social responsibility. Those emphasizing free markets value the unique advantage of prediction markets in pricing future events and are unwilling to compromise this ability due to any external restrictions; those prioritizing social responsibility worry that excessive permissiveness could gradually escalate into harm to public interests and social stability. This divergence typically has a common solution: as friction arises and deepens, both sides gradually find a suitable balance through negotiation and compromise. Like every emerging industry, regulatory details and industry self-regulation for prediction markets won't materialize out of thin air. The future of the industry will be shaped by participants, regulators, and society as a whole. The path is forged by those who walk it; Khamenei's death is pushing prediction markets to push the boundaries of ethics.