Case 1:25-cv-14723 Document 10-1 Filed 08/19/25 Page 11 of 34 PageID: 83
the probability that the event will occur. Id. at *2. Traders may use event contracts to mitigate
risk ( e.g. , an orange grower may buy a contract predicting an early frost to offset the risk of loss
of income from frost damage) or simply to seek a financial return. Id . Unlike a sportsbook,
where bettors place bets against the house and the house sets the odds in its favor, when traders
enter into event contracts, the contracts are bilateral with another trader on the other side, and the
market sets the contract price.
The CEA sets forth a comprehensive federal framework for regulating commodity futures
and swaps trading. See KalshiEx , 2025 WL 1218313, at *1-2. In 1974, Congress established the
CFTC, the federal agency that oversees and regulates commodity futures and swaps trading. Id.
Congress intended to centralize regulatory authority with the CFTC to avoid the “total chaos”
that could ensue if states attempted to regulate the futures markets, thereby subjecting futures
trading to different regulations. Hearings Before the Committee on Agriculture and Forestry,
United States Senate, on S. 2485, S. 2587, S. 2837 and H.R. 13113, 93d Cong., 2d Sess. 685
(1974) (“Senate Hearings”) (statement of Sen. Clark); see also Am. Agric. Movement, Inc. v. Bd.
of Trade of City of Chicago , 977 F.2d 1147, 1156 (7th Cir. 1992) (setting forth legislative history
of the CFTC Act of 1974), abrogated on other grounds by Time Warner Cable v. Doyle , 66
F.3d 867, 875 (7th Cir. 1995). Indeed, Congress considered adding but ultimately removed from
the bill’s final language a provision of the CEA that would have preserved parallel state authority
over futures trading. See 120 Cong. Rec. 30,464 (1974) (statements of Sens. Curtis and
Talmadge). As described below, the CEA was further amended by the Dodd-Frank Act of 2010,
Pub. L. No. 111-203, 124 Stat. 1376, which brought swaps within the coverage of the CEA and
added a special rule about event contracts. See 7 U.S.C. § 7a-2(c)(5)(C)(i).
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