Caroline Pham, Acting Chairperson Commodity Futures Trading Commission Page 8 of 13 by the District Court’s sound reasoning in KalshiEX , Congress’s clear intent and the CEA’s legislative history, and Kalshi’s on-the-record statements. 6 C. Sports Contracts Are Expressly Prohibited Under the Commodity Exchange Act’s “Special Rule,” 7 U.S.C. § 7a-2(c)(5)(C), and the CFTC’s Implementing Regulations, 17 C.F.R. § 40.11(a)(1), Because They Involve Gaming. The CEA’s “Special Rule” provides that the CFTC may determine that contracts involving certain enumerated categories (which expressly include “gaming”) are contrary to the public interest, and as a result are prohibited from being listed or traded. 7 7 U.S.C. § 7a-2(c)(5)(C). In particular, the “Special Rule” provides: (i) Event Contracts In connection with the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency . . . by a designated contract market . . . , the [CFTC] may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve— (I) activity that is unlawful under any Federal or State law; (II) terrorism; (III) assassination; (IV) war; (V) gaming; or 6 On September 12, 2024, the CFTC appealed the District Court’s decision to the D.C. Circuit. That appeal is ongoing and the D.C. Circuit has not yet issued an opinion on the merits. KalshiEX LLC v. Commodity Futures Trading Comm’n , No. 24-5205 (D.C. Cir.). 7 It is important to note that Sports Contracts, arguably, may not be covered “commodities,” and could therefore be beyond the scope of both the CEA and the CFTC’s regulatory jurisdiction. See 7 U.S.C. § 2(a)(1)(A) (“The Commission shall have exclusive jurisdiction . . . with respect to accounts, agreements …, and transactions involving swaps or contracts of sale of a commodity for future delivery . . . .”); 7 U.S.C. § 1a(9) (defining the term “commodity” to mean certain tangible goods like wheat, cotton, or corn); Id. § 1a(19)(iv) (defining the term “excluded commodity” to mean, among other things, “an occurrence, extent of an occurrence, or contingency . . . that is . . . associated with financial, commercial, or economic consequences.”). Here, a sports event may not be “associated with financial, commercial, or economic consequences.” As such, Sports Contracts would be outside the bounds of activity governed by the CEA and would therefore be strictly governed by tribal or state gaming laws.
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