Case 2:25-cv-00575-APG-BNW Document 45 Filed 04/09/25 Page 8 of 17
1 2 3 4 5 6 7 8 9
contracts if it determines those contracts are contrary to the public interest. 7 U.S.C. § 7a- 2(c)(5)(C)(i). Among the types of contracts that can be subject to this public interest review are contracts that “involve” certain categories like terrorism, war, or assassination. Id. As relevant to Kalshi’s contracts at issue in this case, the special rule also covers event contracts that involve “activity that is unlawful under any Federal or State law” or “gaming.” Id. In 2020, the CFTC authorized Kalshi to list event contracts as a DCM. Id. at *4; see also ECF No. 18-1 at 3. Kalshi started offering congressional control contracts that ask which party will control the House or Senate on a specific date in the future. KalshiEX LLC , 2024 WL 4164694, at *4. As explained by the district court in KalshiEX LLC : The congressional control contracts are “yes”/“no” event contracts that pose the question: “Will <chamber of Congress> be controlled by <party> for <term>?” The contracts expire on February 1 of the year that the relevant term begins, and the payout is determined by the party affiliation of the leader of a specific chamber of Congress (i.e., the Speaker of the House for the House of Representatives or the President Pro Tempore for the Senate). Upon the contracts’ expiration, buyers who correctly predicted the electoral outcome will receive one dollar per contract purchased, but purchasers who made an erroneous prediction about congressional control receive nothing in return for their investment. Id. To avoid conflicts of interest, Kalshi identified categories of traders who were prohibited from entering the contracts, such as members of congress, congressional staff, political organizations, or polling organizations. Id. Kalshi self-certified these election-based event contracts in June 2023. Id. The CFTC advised Kalshi that it was going to conduct a public interest review on these contracts because they involved two activities in the special rule: gaming (betting on elections) and unlawful activity (many states make it illegal to bet on elections). Id. After conducting that review, the CFTC issued an order prohibiting Kalshi from listing its congressional control contracts because
10 11 12 13 14 15 16 17 18 19 20 21 22 23
8
Made with FlippingBook - Online catalogs