Case 2:25-cv-01541-JCM-DJA Document 7 Filed 08/19/25 Page 13 of 31
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Kalshi, whose event contracts Robinhood makes available on its platform, is a CFTC-designated contract market. KalshiEx , 2025 WL 1073495, at *1. An exchange may submit new contracts to the CFTC for approval prior to listing; alternatively, it may self-certify the contracts as complying with CFTC requirements. 7 U.S.C. § 7a-2(c)(1), (4)(A); 17 C.F.R. §§ 40.2(a), 40.3(a), 40.11(c). Generally, the CFTC “shall approve a new contract” unless the CFTC finds that it would violate the CEA or CFTC regulations. 7 U.S.C. § 7a-2(c)(5)(B). The CEA contains a special rule relating to CFTC review and approval of event contracts, which was added by the Dodd-Frank Act of 2010. Pub. L. No. 111-203, § 745(b), 124 Stat. 1376, 1735-36. With respect to event contracts specifically, the CFTC may prohibit event contracts in specific categories if it determines them to be “contrary to the public interest.” 7 U.S.C. § 7a-2(c)(5)(C)(i); 17 C.F.R. § 40.11(a)(1)-(2). If an exchange self-certifies a new contract, the CFTC may initiate a review of that contract within 10 business days of receiving notice of it. See 7 U.S.C. § 7a-2(c)(2); see also 17 C.F.R. § 40.11(c) (permitting the CFTC to select a 90-day review period for event contracts). If the CFTC does not act within that window, the new contract is deemed approved and becomes effective. See 7 U.S.C. § 7a-2(c)(2). Kalshi self-certified and began listing sports-related event contracts on January 24, 2025. KalshiEx , 2025 WL 1073495, at *4. Because the CFTC declined to review or prohibit Kalshi’s sports-related event contracts, id. , they were deemed approved and became effective upon the expiration of the 10-day probationary period under 7 U.S.C. § 7a-2(c)(2) and are legal under federal law. Fundamental differences in how contract markets and sportsbooks operate mean they are susceptible to different forms of risk to participants. Contract markets leverage the power and rigor of financial markets to provide traders with liquidity and transparency, and prices are set by market participants. Customers can manage risk by adjusting or exiting their positions up until the contract expires, and prices respond accordingly. These markets may be at risk of market manipulation and other market distortions and inefficiencies. Sportsbooks, by comparison, have
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