Id. at 108. Discussing the history of CFTC regulation, the court wrote, “ swaps . . . like the one- touch barrier option, are regulated by the CEA after the Dodd-Frank amendments.” Id. at 113 (emphasis in original); see also id. at 112–113 (“An example of a swap is the type of one-touch barrier option at issue here: The parties entered into a contract based on their expectations about the relative value of dollars to rand.”). Years before, the defendant had filed a motion to dismiss his indictment, which the district court denied. United States v. Phillips , 690 F. Supp. 3d 268, 293 (S.D.N.Y. 2023). In its analysis, the court quoted the CEA’s definition of swap—the precise provision at issue here—and then continued, “[t]he Indictment alleges that the One Touch Option was a ‘contract,’ . . . that provided for a ‘payment,’ . . . based on the ‘occurrence of an event,’ namely the USD/ZAR exchange rate falling below 12.50 at any point prior to on or about January 2, 2018. Thus, the One Touch Option itself falls squarely within the CEA.” Id. at 285 (quoting 7 U.S.C. § 1a(47)A(ii)) (emphasis added) (citations omitted). The same analysis applied to this case means that a contract providing for payment, for example, if “at any point during the game one team leads another by at least 20 points” would fall squarely within the CEA’s regulation of swaps. b) Potential financial, economic, or commercial consequence The defendants argue in the alternative that Kalshi’s sports event contracts are not swaps because they are not “associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A)(ii). According to the defendants, for a sports event contract to constitute a swap, “the outcome of the event must be logically connected with” a financial result “that naturally follows from the sports outcome,” which “requires more than simply having some incidental or down-the-line financial implication . . . . [T]here must be an inherent connection.” (Doc. No. 34 at 23–24 (citing Kalshi D. Nev. II , 2025 WL 3286282, at *6).) But, the defendants argue, an individual player’s performance, or the number of points a team scores, has no, or, if any, only attenuated, commercial consequence. ( Id. at 24.) The plaintiff disagrees and takes issue
16
Case 3:26-cv-00034 Document 48 Filed 02/19/26 Page 16 of 25 PageID #: 884
Made with FlippingBook - Online catalogs