Case 2:25-cv-00978-APG-BNW Document 42 Filed 08/04/25 Page 5 of 26
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“Swaps” include contracts “dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A)(ii). These provisions led to the listing of “event contracts” by DCMs on their registered exchanges, subject to the CFTC’s exclusive jurisdiction. Event contracts are a type of derivative contract with a payment schedule based on the outcome of a specified event as of an expiration date. ECF No. 1 (“Compl.”) ¶¶ 37–40; see also Contracts & Products , CFTC, https://www.cftc.gov/IndustryOversight/ContractsProducts/index.htm (“An event contract . . . is a derivative contract whose payoff is based on a specified event, occurrence, or value . . . .”). They are “swaps” under the CEA’s definition. An event contract purchaser takes a position on an event’s outcome—usually a “yes” or “no” position, with “yes” meaning the event will occur by the expiration date and “no” meaning it will not occur. Compl. ¶ 38. The “yes” position purchaser profits if the specified outcome occurs by the expiration date, while the “no” position purchaser profits if it does not. Id. The event contract’s purchase price fluctuates based on supply and demand, reflecting the market’s perception of the likelihood of the specified event’s occurrence or non-occurrence. Id. ¶ 40. The event contract holder may sell their position at a profit or loss prior to expiration. Id. ¶ 38. An event contract can be tied to a variety of events, including specified movements of a financial index, a particular yield on the ten-year U.S. Treasury note, the magnitude of the upcoming hurricane season, or the outcome of political, scientific, or live sporting events. Id. ¶ 39. The Dodd-Frank Act amendments in 2010 included a “Special Rule” that pertains specifically to event contracts. The Special Rule allows the CFTC to deem event contracts contrary to the public interest if they “involve” (i) “activity that is unlawful under any Federal or State law,” (ii) “terrorism,” (iii) “assassination,” (iv) “war,” (v) “gaming,” or (vi) “other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.” 7 U.S.C. § 7a-2(c)(5)(C)(i). The CFTC “may,” but need not, prohibit an event contract under the Special Rule if it falls into one of these six categories. Id.
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