Case 3:25-cv-06162-JSC Document 35 Filed 09/04/25 Page 13 of 34
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contracts of sale of a commodity for future delivery, traded or executed on a Designated Contract
Market). 6
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The CFTC is vested with the authority to evaluate contracts that pertain to excluded
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commodities, defined in 7 U.S.C. § 1a(19), and determine whether those contracts are contrary to
the public interest. 7 U.S.C. § 7a-2(c)(5)(C). 7 Consistent with its vested authority to evaluate
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whether contracts are contrary to the public interest, the CFTC promulgated regulations prohibiting
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registered entities from listing contracts pertaining to excluded commodities and similar activities.
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17 C.F.R. § 40.11(a) (“A registered entity shall not list for trading or accept for clearing on or
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through the registered entity [a contract] that involves, relates to, or references terrorism,
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assassination, war, gaming , or an activity that is unlawful under any State or Federal law [or] an
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activity that is similar to an activity enumerated [herein]”) (emphasis added). As a result, the CFTC
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regulations prohibit a registered entity, such as Kalshi, from offering contracts that involve
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excluded commodities, such as gaming. Neither the CEA nor the CFTC regulations define
“gaming.” KalshiEX LLC , 2024 WL 4164694, at *4, *8; see generally Proposed rules for Events
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Contracts, 89 Fed. Reg. 48968-01, *48974–*48977 (June 10, 2024) (discussing lack of definition
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of “gaming” in the CEA/CFTC regulations and proposing a definition).
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Registered entities, such as Kalshi, seeking approval to list contracts pertaining to
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enumerated excluded commodities can voluntarily submit prospective contracts to the CFTC for
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a determination that the contracts comply with the CEA and are not contrary to the public interest.
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17 C.F.R. § 40.3. Section 40.3 specifies that this mechanism is for seeking approval of “a new
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product,” or “if a product was initially submitted under § 40.2 . . . .” 17 C.F.R. § 40.3(a). Kalshi
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has chosen not to avail itself of CFTC approval prior to offering its gaming contracts on its DCM.
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4 NOTICE OF MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES [ Case No.: 25-cv-06162-JSC] 7 Note that “[t]he reference to ‘1a(2)(i)’ [in 7 U.S.C. § 7a-2(c)(5)(C)] is nonsensical because neither CEA § 1a(2)(i) nor CEA § 1a(2) appear in the definition of ‘appropriate Federal banking agency.’ The authors [of the article] believe that Congress instead meant to refer to CEA § 1a(19)(i), a reading consistent with CEA [§ 7a-2(c)(5)(C)]’s focus on excluded commodities.” ARTICLE: STATES’ BIG GAMBLE ON SPORTS BETTING, 12 UNLV Gaming L.J. 53, 67. 6 A DCM, defined in 17 C.F.R. § 1.3 and also known as a “futures exchange,” is a “board of trade” designated as a contract market by the CFTC. A “board of trade,” is defined in 7 U.S.C. § 1a(6) as an “organized exchange or other trading facility.” Those terms, in turn, are defined in 7 U.S.C.§§1a(37) and (51).
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