Case 1:25-cv-08846-AT Document 60-1 Filed 12/03/25 Page 15 of 31
§ 40.11(a)(1). The Special Rule grants the CFTC discretion to determine whether event contracts are “contrary to the public interest” if they involve gaming, unlawful activity under federal or state law, or certain other activities contrary to the public interest, like assassinations. 7 U.S.C. § 7a-2(c)(5)(C)(i). When the CFTC makes such a determination, the CEA expressly prohibits those categories of contracts. Id. § 7a-2(c)(5)(C)(ii). Here, “[t]he CFTC made that public interest determination on a blanket basis when it promulgated § 40.11(a),” which prohibits event contracts related to gaming or unlawful activity under federal or state law. See Crypto.com , 2025 WL 2916151, at *10. 5 Further, in promulgating this blanket prohibition, the CFTC acted consistently with Congress’s intent that the Special Rule prevent the usage of event contracts “to enable gambling,” particularly sports betting. 6 In fact, as Senator Lincoln—one of the principal architects of the Special Rule—explained in a colloquy on the Senate floor:
[It] is our intent … [that the Special Rule] prevent derivatives contracts that are contrary to the public interest because they exist predominantly to enable gambling through supposed “event contracts.” It would be quite easy to construct an “event contract” around sporting events such as the Super Bowl, the Kentucky Derby, and Masters Golf Tournament. These types of contracts would not
5 That Kalshi may believe “sports betting” is not contrary to the public interest is irrelevant; the CFTC, in its discretion, already made the determination that event contracts involving gaming are categorically contrary to the public interest. 17 C.F.R. § 40.11(a)(1). 6 Kalshi has also suggested that its sports-event contracts are different from gaming or “sports betting” because there is no betting against the “house.” Appellant Br. at 18–19, KalshiEX LLC v. Martin , No. 25-1892 (4th Cir. Oct. 15, 2025). Not so. A “house” is not a necessary element of gambling. For example, pari-mutuel wagering—which is a type of betting system in which all bets or wagers are placed together in a “pool” and players are betting against each other rather than a “house”—is generally considered gaming and directly mirrors what Kalshi is offering. See N.Y. Rac. Pari-Mut. Wag. & Breed. Law § 100 et seq. Further, even if sports betting does require a “house” (it does not), Kalshi meets this standard because its subsidiary, “Kalshi Trading,” sets bet prices, holds the opposite side to its customers on trades, and effectively acts as the “house.” See Pl. Br. Supp. Prelim. Inj. Ex. 3 at 3–5, KalshiEX LLC v. Schuler , No. 2:25- cv-1165-SDM-CMV (S.D. Ohio Oct. 7, 2025), ECF No. 11-3.
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