Scandals in Prediction Markets: Bets on Death in Crypto and Fiat Platforms

In the world of cryptocurrencies and prediction markets, a real drama is unfolding around bets on geopolitical events, including the death or resignation of world leaders. Recent events involving Ali Khamenei, Iran's Supreme Leader, and former US President Jimmy Carter have highlighted ethical and regulatory issues that call into question the future of such platforms.

Scandal on Kalshi

The Kalshi platform, regulated by the US Commodity Futures Trading Commission (CFTC), faced massive outrage after Ali Khamenei's death from US-Israeli strikes on February 28, 2026. Users were betting on whether Khamenei would "resign" as Supreme Leader by March 1. Trading volume exceeded $50 million, with $20 million on the day of the attack.

However, the platform did not count the death as a win for "yes" bets. Instead, per the "death carveout" rules, bets were settled at the last market price before death confirmation, and fees refunded. Kalshi CEO Tarek Mansourexplained in an X post:

"We do not allow markets directly tied to death to avoid profiting from violence."

Users expecting profits were left with nothing, accusing the platform of fraud and unclear rules.

A similar situation occurred with Jimmy Carter, who died in December 2024. Bets on whether he would live until Trump's inauguration were annulled, and funds refunded citing the same death profit exclusion mechanism. Kalshi refunded all fees and compensated net losses, losing millions, but this didn't calm traders. Debates on X continue: one user wrote, "You count on death when it's profitable, but not when you lose."

Polymarket Pays Out, But Suspected of Insider Trading

Unlike fiat-based Kalshi, the crypto platform Polymarket (built on Polygon using USDC) paid out winnings on similar markets. Trading volume for Khamenei's "resignation" reached $54.5 million, and "yes" bets settled at nearly 100% after death. This drew attention but also sparked scandal: six anonymous wallets earned $1.2 million by betting hours before the attack. One, "Magamyman," turned$87,000 into $430,000 by buying "yes" at 17 cents when odds were low.

Analysts at Bubblemaps suspect insider trading linked to Trump's circle (the president's son is on Polymarket's board). Senator Chris Murphy (Democrat) called it "madness" and announced a bill to ban bets on war and death: "People around Trump are profiting from war and death." This underscores the risks of decentralized crypto markets: lack of regulation allows anonymity but raises ethical questions.

Cynicism of Betting on Death

Betting on death, World War III, or other disasters for $400 seems cynical. Research shows such markets can create "implicit rewards" for crimes, turning predictions into potential incentives for murders. In the crypto space, where platforms like Polymarket are growing (trading volume exceeded $500 million for Iran), this threatens the reputation of the entire industry.

Future of Crypto Prediction Markets

The scandals are forcing regulators to act. Democrats are proposing laws to ban "death markets," while Kalshi and Polymarket promise to improve transparency. For crypto investors, this is a reminder: prediction markets are a powerful tool for risk assessment, but ethics and regulation will determine their fate. In 2026, with updated data, we see how crypto platforms like Polymarket benefit from flexibility but risk due to lack of control.