Congressman Hurd Page 2 of 3
The IGA requests that you join this bi-partisan legislation that protects State and Tribal sovereignty as well as protecting Colorado consumers from gambling disguised as commodities. Timeline of the Proliferation of Illegal Gambling Under the CFTC and Department of Agriculture Pursuant to the Commodities Exchange Act (“CEA”), certain self-certified entities may offer “event contracts” for commodities trades in a regulated marketplace overseen by the CFTC. Event contracts are historically used to protect disruptions in our food supply and to protect farmers and natural resource producers from unexpected events that could impact their products. They are useful to aggregate information and predict the likelihood of specific events, which can be used for decision-making, planning, or even as a financial tool. They are usually tied to events with clear, defined economic-related outcomes, like a macroeconomic indicator, corporate earnings, or dollar value of crops damaged by a weather event. CEA self-certified designated contract makers such as Kalshi LLC, Crypto.com, and Robinhood, are using event contracts to cloak their unlawful, unregulated gambling activity as federally- regulated market transactions. Though event contracts are offered for a multitude of different types of events, the CEA did not legalize gambling at the federal level, nor where state and tribal gambling laws still apply. In fact, in the CEA, Congress identified certain contracts, including those that involve “gaming” or “violations of state law” as contrary to the public interest, and gave the CFTC the responsibility to prohibit such contracts. The CFTC for most of its existence carried out that responsibility and exercised its authority to bar these contracts, but since February of this year it has failed to do so. As a result, purported event contracts for sports and other events continue to be offered in ALL 50 States contrary to State gambling laws and regulations. These “event contracts” authorized by the CFTC violate the IGRA and Tribal-State compacts. Under the IGRA, sports betting can only be conducted on Indian lands pursuant to a Class III gaming compact. 25 U.S.C. § 2710(d)(1). However, CFTC authorized “event contracts” are not restricted to avoid Indian lands, and thus enable sports betting on Indian lands in violation of the statute. Furthermore, CFTC event contracts violate retail and online sports betting exclusivity terms in compacts that were negotiated between tribes and several state governments. As Senator Lincoln explained on the Senate floor, Congress enacted the “Special Rule” codified under the CEA to “restrict event contract[s] around sporting events,” because “these types of contracts would not serve any real commercial purpose… rather, they would be used solely for gambling.” 156 Cong. Rec. S5906-7 (2010). Thus, the CFTC in 2012 promulgated Regulation 40.11, which prohibits listing or trading event contracts involving “gaming.” In this case, “event contracts related to… sporting events… can easily be construed as gaming; they can even be construed as games played for stakes.” KalshiEX LLC v. CFTC , No. 23-3257, 2024 WL 4164694 at *12 (D.D.C. Sept. 12, 2024). Therefore, Regulation 40.11 prohibits sports event contracts from being listed or traded because they involve gaming. Furthermore, Regulation 40.11 prohibits events contracts involving “activity that is unlawful under any State or Federal law.”
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