designated contract markets. Dave Aron & Matt Jones, States’ Big Gamble on Sports Betting , 12 UNLV Gaming L.J. 53, 63 (2021) (citing 7 U.S.C. § 2(a)(1)(A)). A designated contract market may seek CFTC approval for any new contract. 7 U.S.C. § 7a–2(c)(4). Alternatively, a designated contract market may list a new contract and submit a certification that the contract complies with the CEA. Id. § 7a–2(c)(1); Saule T. Omarova, License to Deal: Mandatory Approval of Complex Financial Products , 90 Wash. U. L. Rev. 63, 109 (2012) (same). The CEA contains a “[s]pecial rule” pertaining to event contracts, meaning “the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency … by a designated contract market or swap execution facility ….” 7 U.S.C. § 7a–2(c)(5)(C)(i). Under the special rule, the CFTC may determine that an agreement, contract, or transaction is contrary to the public interest if it involves an activity that is unlawful under federal or state law, terrorism, assassination, war, gaming, or a similar activity. Id. ; see also Michael P. Vandenbergh, Kaitlin Toner Raimi & Jonathan M. Gilligan, Energy and Climate Change: A Climate Prediction Market , 61 UCLA L. Rev. 1962, 1994 (2014) (noting the CFTC’s jurisdiction over event contracts and authority to determine whether they are contrary to the public interest). In such cases, the CFTC must take final action within 90 days absent an extension. 7 U.S.C. § 7a–2(c)(5)(C)(iv). B. Kalshi and the Cease-and-Desist Letter The CFTC certified Kalshi as a designated contract market in 2020. (Compl. p. 10.) On January 24, 2025, Kalshi self-certified and began listing sports-related contracts such as those buying or selling positions on which team will advance in a given round of a college basketball tournament. ( Id. p. 11.) The CFTC has not reviewed or prohibited Kalshi’s sports-related contracts despite possessing the authority to do so. ( Id. )
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