that is similar to an activity enumerated in § 40.11(a)(1) of this part, and that the Commission determines, by rule or regulation, to be contrary to the public interest.” 17 C.F.R. § 40.11 Review of event contracts based upon certain excluded commodities. As a result, the CEA and the CFTC’s existing regulations prohibit registered entities from listing transactions that involve or relate to gaming – commonly defined as gambling. Despite this clear prohibition, over the past year, the CFTC has permitted a growing number of its registered entities to offer an ever-growing range of gambling contracts on the outcomes of sporting events, including moneyline bets on individual games, parlays on multiple games, proposition bets on individual performance. While the law and regulation are clear, prediction markets have attempted to blur the lines between gambling and investing. The most prolific DCM currently licensed by the CFTC that offers gambling on the outcome of sports is KalshiEX LLC (“Kalshi”). Kalshi has attempted to exploit the lack of defined terms in the CEA and CFTC regulations to further complicate the issue of prediction market-sports gambling in its legal filings and its lobbying efforts to oppose the enforcement of existing laws and regulations that prohibit gambling through financial exchanges. Last year, in defense of its event contracts relating to the outcomes of the 2024 federal elections, Kalshi admitted that the CEA and CFTC regulations did prohibit event contracts on the outcome of sporting events. Below is a list of examples provided by Mr. Daniel Wallach, a well-respected sports betting attorney, through a post on LinkedIn, where Kalshi admits in court proceedings that event contracts relating to the outcome of sports violate the CEA and CFTC regulations: • “Congress did not want sports betting to be conducted on derivatives markets.” - Kalshi's Initial Brief filed in the D.C. Circuit on Nov. 15, 2024, at p. 41 • “Evidently, Congress sought to prevent exchanges from facilitating casino-style or sports gambling.” - Kalshi's Initial Brief filed in the D.C. Circuit on Nov. 15, 2024, at p. 45 • “[C]ontracts relating to games—again, activities conducted for diversion or amusement—are unlikely to serve any 'commercial or hedging interest.'” - Kalshi's Initial Brief filed in the D.C. Circuit on Nov. 15, 2024, at p. 45 • “Congress was particularly concerned at the time it enacted this statute about sports betting and that was probably what they were getting at with the word ‘gaming.’” - Kalshi to the D.C. Circuit at the January 17, 2025 oral argument (at 49:50-50:08) • “The 'gaming' category reaches contracts contingent on games—for example, whether a certain team will win the Super Bowl. It thus functions as a check on attempts to launder sports gambling through the derivatives markets." - Kalshi MOL in Support of MSJ, Jan. 25, 2024, at 16 • “Football, horseracing and golf. They’re all games…. It’s something that has no inherent economic significance." - Kalshi's May 30, 2024 oral argument to the district court on its motion for summary judgment, Dkt. # 40, at p. 15 • “Contracts that involve games are probably not the type of contracts that we want to be listed on an exchange, because they don’t have any real economic value to them." - Kalshi's 5/30/24 oral argument to the district court on its motion for summary judgment, Dkt. # 40, at p. 15. See Daniel Wallach LinkedIn Post at https://www.linkedin.com/posts/amanda-fischer- 21877210_the-maryland-federal-court-is-right-to-demand-activity-7335376474855661570-uib_
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