Case 1:25-cv-01283-ABA Document 29 Filed 05/19/25 Page 11 of 17
recognized that swaps involving gaming raised public-interest concerns. Congress’s solution was not to ban gaming contracts outright, but rather to adopt the Special Rule authorizing the CFTC to review and approve these contracts if they comport with the public interest. And attitudes about gaming have changed dramatically since Congress enacted the Special Rule. In 2010, federal law broadly prohibited sports betting. But the Supreme Court in the 2018 Murphy decision allowed states to legalize sports betting, and a majority of states—including Maryland in 2021—have done so. Sports betting is now a ubiquitous nationwide industry. One of the reasons Congress granted the CFTC discretion to engage in public-interest review rather than banning gaming contracts outright was to allow the CFTC to account for this kind of evolution. 3. CFR 40.11 reinforces the CFTC’s exclusive jurisdiction over Kalshi’s event contracts. Defendants rely heavily (at 20) on 17 C.F.R. 40.11, which they contend “expressly prohibits ex ante gaming” contracts on DCMs. But the text of Section 40.11 refutes Defendants’ position. Section 40.11 is not, as Defendants allege (at 20), a “blanket prohibition” of gaming contracts. While Section 40.11(a) generally bars DCMs from offering a contract that “involves, relates to, or references” “gaming,” Section 40.11(c) proceeds to reserve the CFTC’s discretion to determine whether a contract is nevertheless permissible. Under Section 40.11(c), a DCM may offer contracts that “involve, relate to, or reference an activity enumerated in Section 40.11(a)(1)” by either self-certifying the contract under “Section 40.2” or preclearing the contract with the CFTC under “Section 40.3.” 17 C.F.R. § 40.11(c). The contract becomes effective upon self-certification or preclearance. 7 U.S.C. § 7a-2(c)(1); 17 C.F.R. § 40.11(c). The CFTC may then decide whether to take action, such as by subjecting the contract “to a 90- day review” from the date that the CFTC notifies the DCM of a “potential violation.” 17 C.F.R. § 40.11(c). The CFTC must then make a determination whether the contract is prohibited under
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