KalshiEX LLC

May 3, 2023

SUBMITTED VIA CFTC PORTAL

Secretary of the Commission

Office of the Secretariat

U.S. Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: KalshiEX LLC – CFTC Regulation 40.6 Notification Regarding the Amendment of

the “Will the Federal Reserve cut rates by <date>?” Contract

Dear Sir or Madam,

Pursuant to Section 5c(c) of the Commodity Exchange Act and Section 40.6 of the regulations of the

Commodity Futures Trading Commission, KalshiEX LLC (Kalshi) hereby notifies the Commission that

it is amending the “Will the Federal Reserve cut rates by <date>?” contract (Contract).

This contract is a straight-forward modification to the previous “Will the Federal Reserve cut rates by

<date>?” contract. The changes are as follows:

1. The position limit has been changed from $25,000 to $7,000,000, and conforming changes.

Along with this letter, Kalshi submitted the following documents:

● A clean copy of the amended Contract; and

● A redline showing the changes to the original.

If you have any questions, please do not hesitate to contact me.

Sincerely,

Xavier Sottile

Head of Markets

KalshiEX LLC

xsottile@kalshi.com

KalshiEX LLC
KalshiEX LLC

KalshiEX LLC

Official Product Name: Will the Federal Reserve cut rates by <date>?

Rulebook: RATECUT

Kalshi Contract Category: Political Decision

Federal Reserve rate cut

May 3, 2023

CONCISE EXPLANATION AND ANALYSIS OF THE PRODUCT AND ITS

COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ACT, INCLUDING CORE

PRINCIPLES AND THE COMMISSION'S REGULATIONS THEREUNDER

Pursuant to Commission Rule 40.2(a)(3)(v), the following is a concise explanation and analysis

of the product and its compliance with the Act, including the relevant Core Principles, and the

Commission's regulations thereunder.

I. Introduction

The “Will the Federal Reserve cut rates by <date>?” Contract is a contract relating to

whether the Federal Reserve will reduce the federal funds rate in a given period. After

careful analysis, Kalshi (hereafter referred to as “Exchange”) has determined that the

Contract complies with its vetting framework, which has been reviewed by the CFTC and

formed part of the Exchange’s application for designation as a Contract Market (“DCM”)

that was approved by the Commission.

The Federal Reserve has been raising its key interest rate, the federal funds rate,

throughout 2022 and plans to continue to do so until mid-2023 (as of July 2022).

Further information about the Contract, including an analysis of its risk mitigation and

price basing utility, as well as additional considerations related to the Contract, is

included in Confidential Appendices B, C, and D.

Pursuant to Section 5c(c) of the Act and CFTC Regulations 40.2(a), the Exchange hereby

certifies that the listing of the Contract complies with the Act and Commission

regulations under the Act.

General Contract Terms and Conditions: The Contract operates similar to other event

contracts that the Exchange lists for trading. The minimum price fluctuation is $0.01 (one

cent). Price bands will apply so that Contracts may only be listed at values of at least

$0.01 and at most $0.99. Further, the Contract is sized with a one-dollar notional value

and has a minimum price fluctuation of $0.01 to enable Members to match the size of the

contracts purchased to their economic risks. The Exchange has further imposed position

KalshiEX LLC
KalshiEX LLC

limits (defined as maximum loss exposure) of $7,000,000 USD on the Contract. As

outlined in Rule 5.12 of the Rulebook, trading shall be available at all times outside of

any maintenance windows, which will be announced in advance by the Exchange.

Members will be charged fees in accordance with Rule 3.6 of the Rulebook. Fees are

charged in such amounts as may be revised from time to time to be reflected on the

Exchange’s Website. Additionally, as outlined in Rule 7.2 of the Rulebook, if any event

or any circumstance which may have a material impact on the reliability or transparency

of a Contract’s Source Agency or the Underlying related to the Contract arises, Kalshi

retains the authority to designate a new Source Agency and Underlying for that Contract

and to change any associated Contract specifications after the first day of trading. That

new Source Agency and Underlying would be objective and verifiable. Kalshi would

announce any such decision on its website. All instructions on how to access the

Underlying are non-binding and are provided for convenience only and are not part of the

binding Terms and Conditions of the Contract. They may be clarified at any time.

Furthermore, the Contract’s payout structure is characterized by the payment of an

absolute amount to the holder of one side of the option and no payment to the

counterparty. During the time that trading on the Contract is open, Members are able to

adjust their positions and trade freely. After trading on the Contract has closed, the

Expiration Value and Market Outcome are determined. The market is then settled by the

Exchange, and the long position holders and short position holders are paid according to

the Market Outcome. In this case, “long position holders” refers to Members who

purchased the “Yes” side of the Contract and “short position holders” refers to Members

who purchased the “No” side of the Contract. If the Market Outcome is “Yes,” meaning

that the Federal Reserve the federal funds rate is cut between Issuance and <date>, then

the long position holders are paid an absolute amount proportional to the size of their

position and the short position holders receive no payment. If the Market Outcome is

“No,” then the short position holders are paid an absolute amount proportional to the size

of their position and the long position holders receive no payment. Specification of the

circumstances that would trigger a Market Outcome of “Yes” are included below in the

section titled “Payout Criterion” in Appendix A.

KalshiEX LLC
KalshiEX LLC

CERTIFICATIONS PURSUANT TO SECTION 5c OF THE COMMODITY EXCHANGE

ACT, 7 U.S.C. § 7A-2 AND COMMODITY FUTURES TRADING COMMISSION RULE

40.2, 17 C.F.R. § 40.2

Based on the above analysis, the Exchange certifies that:

❏ The Contract complies with the Act and Commission regulations thereunder.

❏ This submission (other than those appendices for which confidential treatment has been

requested) has been concurrently posted on the Exchange’s website at

https://kalshi.com/regulatory/filings.

Should you have any questions concerning the above, please contact the exchange at

ProductFilings@kalshi.com.

______________________

By: Xavier Sottile

Title: Head of Markets

Date: May 3, 2023

KalshiEX LLC
KalshiEX LLC

Attachments:

Appendix A - Contract Terms and Conditions

Appendix B (Confidential) - Further Considerations

Appendix C (Confidential) - Source Agency

Appendix D (Confidential) - Compliance with Core Principles

KalshiEX LLC
KalshiEX LLC

APPENDIX A – CONTRACT TERMS AND CONDITIONS

Official Product Name: Will the Federal Reserve cut rates by <date>?

Rulebook: RATECUT

KalshiEX LLC
KalshiEX LLC

RATECUT

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is press releases of the Federal Reserve between

Issuance and <date>. Revisions to the Underlying made after Expiration will not be accounted

for in determining the Expiration Value.

Instructions: Press releases of the Federal Reserve following meetings of the Federal Open

Market Committee (FOMC) can be found here.

1 The last time the FOMC cut rates was in March

2020, when it stated that, “the Committee decided to lower the target range for the federal funds

rate to 0 to 1/4 percent.” These instructions on how to access the Underlying are provided for

convenience only and are not part of the binding Terms and Conditions of the Contract. They

may be clarified at any time.

Source Agency: The Source Agency is the Federal Reserve Board.

Type: The type of Contract is an Event Contract.

Issuance: This contract will be issued annually.

<date>: <date> refers to a calendar date specified by Kalshi. Kalshi may list iterations of the

Contract corresponding to variations of <date>.

Payout Criterion: The Payout Criterion for the Contract encompasses the Expiration Values that

the Federal Open Market Committee has announced it will reduce the target range for the federal

funds rate.

Minimum Tick: The Minimum Tick size for the referred Contract shall be $0.01.

Position Limit: The Position Limit for the $1 referred Contract shall be $7,000,000 per Member.

Last Trading Date: The Last Trading Date of the Contract will be the sooner of the date of the

first 10:00 AM ET following the occurrence of an event encompassed in the Payout Criterion

(whereupon the Last Trading Time will be 10:00 AM ET) or <date> (whereupon the Last

Trading Time will be 11:59 PM ET).

Settlement Date: The Settlement Date of the Contract shall be no later than the day after the

Expiration Date, unless the Market Outcome is under review pursuant to Rule 7.1.

1https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

KalshiEX LLC
KalshiEX LLC

Expiration Date: The Expiration Date of the Contract shall be the sooner of the date of the first

10:00 AM ET following the occurrence of an event that is encompassed in the Payout Criterion

or the first 10:00 AM following <date>.

Expiration time: The Expiration time of the Contract shall be 10:00 AM ET.

Settlement Value: The Settlement Value for this Contract is $1.00.

Expiration Value: The Expiration Value is the value of the Underlying as documented by the

Source Agency on the Expiration Date at the Expiration time.

Contingencies: Before Settlement, Kalshi may, at its sole discretion, initiate the Market

Outcome Review Process pursuant to Rule 6.3(c) of the Rulebook. Additionally, as outlined in

Rule 7.2 of the Rulebook, if any event or any circumstance which may have a material impact on

the reliability or transparency of a Contract’s Source Agency or the Underlying related to the

Contract arises, Kalshi retains the authority to designate a new Source Agency and Underlying

for that Contract and to change any associated Contract specifications after the first day of

trading.

KalshiEX LLC
KalshiEX LLC

KalshiEX LLC

Official Product Name: Will the Federal Reserve cut rates by <date>?

Rulebook: RATECUT

Kalshi Contract Category: Political Decision

Federal Reserve rate cut

August 29, 2022May 3, 2023

REDLINE

CONCISE EXPLANATION AND ANALYSIS OF THE PRODUCT AND ITS

COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ACT, INCLUDING CORE

PRINCIPLES AND THE COMMISSION'S REGULATIONS THEREUNDER

Pursuant to Commission Rule 40.2(a)(3)(v), the following is a concise explanation and analysis

of the product and its compliance with the Act, including the relevant Core Principles, and the

Commission's regulations thereunder.

I. Introduction

The “Will the Federal Reserve cut rates by <date>?” Contract is a contract relating to

whether the Federal Reserve will reduce the federal funds rate in a given period. After

careful analysis, Kalshi (hereafter referred to as “Exchange”) has determined that the

Contract complies with its vetting framework, which has been reviewed by the CFTC and

formed part of the Exchange’s application for designation as a Contract Market (“DCM”)

that was approved by the Commission.

The Federal Reserve has been raising its key interest rate, the federal funds rate,

throughout 2022 and plans to continue to do so until mid-2023 (as of July 2022).

Further information about the Contract, including an analysis of its risk mitigation and

price basing utility, as well as additional considerations related to the Contract, is

included in Confidential Appendices B, C, and D.

Pursuant to Section 5c(c) of the Act and CFTC Regulations 40.2(a), the Exchange hereby

certifies that the listing of the Contract complies with the Act and Commission

regulations under the Act.

General Contract Terms and Conditions: The Contract operates similar to other event

contracts that the Exchange lists for trading. The minimum price fluctuation is $0.01 (one

cent). Price bands will apply so that Contracts may only be listed at values of at least

$0.01 and at most $0.99. Further, the Contract is sized with a one-dollar notional value

and has a minimum price fluctuation of $0.01 to enable Members to match the size of the

KalshiEX LLC
KalshiEX LLC

contracts purchased to their economic risks. The Exchange has further imposed position

limits (defined as maximum loss exposure) of $25,0007,000,000 USD on the Contract.

As outlined in Rule 5.12 of the Rulebook, trading shall be available at all times outside of

any maintenance windows, which will be announced in advance by the Exchange.

Members will be charged fees in accordance with Rule 3.6 of the Rulebook. Fees are

charged in such amounts as may be revised from time to time to be reflected on the

Exchange’s Website. Additionally, as outlined in Rule 7.2 of the Rulebook, if any event

or any circumstance which may have a material impact on the reliability or transparency

of a Contract’s Source Agency or the Underlying related to the Contract arises, Kalshi

retains the authority to designate a new Source Agency and Underlying for that Contract

and to change any associated Contract specifications after the first day of trading. That

new Source Agency and Underlying would be objective and verifiable. Kalshi would

announce any such decision on its website. All instructions on how to access the

Underlying are non-binding and are provided for convenience only and are not part of the

binding Terms and Conditions of the Contract. They may be clarified at any time.

Furthermore, the Contract’s payout structure is characterized by the payment of an

absolute amount to the holder of one side of the option and no payment to the

counterparty. During the time that trading on the Contract is open, Members are able to

adjust their positions and trade freely. After trading on the Contract has closed, the

Expiration Value and Market Outcome are determined. The market is then settled by the

Exchange, and the long position holders and short position holders are paid according to

the Market Outcome. In this case, “long position holders” refers to Members who

purchased the “Yes” side of the Contract and “short position holders” refers to Members

who purchased the “No” side of the Contract. If the Market Outcome is “Yes,” meaning

that the Federal Reserve the federal funds rate is cut between Issuance and <date>, then

the long position holders are paid an absolute amount proportional to the size of their

position and the short position holders receive no payment. If the Market Outcome is

“No,” then the short position holders are paid an absolute amount proportional to the size

of their position and the long position holders receive no payment. Specification of the

circumstances that would trigger a Market Outcome of “Yes” are included below in the

section titled “Payout Criterion” in Appendix A.

KalshiEX LLC
KalshiEX LLC

CERTIFICATIONS PURSUANT TO SECTION 5c OF THE COMMODITY EXCHANGE

ACT, 7 U.S.C. § 7A-2 AND COMMODITY FUTURES TRADING COMMISSION RULE

40.2, 17 C.F.R. § 40.2

Based on the above analysis, the Exchange certifies that:

❏ The Contract complies with the Act and Commission regulations thereunder.

❏ This submission (other than those appendices for which confidential treatment has been

requested) has been concurrently posted on the Exchange’s website at

https://kalshi.com/regulatory/filings.

Should you have any questions concerning the above, please contact the exchange at

ProductFilings@kalshi.com.

______________________

By: Eliezer MishoryXavier Sottile

Title: Chief Regulatory OfficerHead of Markets

Date: August 29, 2022May 3, 2023

KalshiEX LLC
KalshiEX LLC

Attachments:

Appendix A - Contract Terms and Conditions

Appendix B (Confidential) - Further Considerations

Appendix C (Confidential) - Source Agency

Appendix D (Confidential) - Compliance with Core Principles

KalshiEX LLC
KalshiEX LLC

APPENDIX A – CONTRACT TERMS AND CONDITIONS

Official Product Name: Will the Federal Reserve cut rates by <date>?

Rulebook: RATECUT

KalshiEX LLC
KalshiEX LLC

RATECUT

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is press releases of the Federal Reserve between

Issuance and <date>. Revisions to the Underlying made after Expiration will not be accounted

for in determining the Expiration Value.

Instructions: Press releases of the Federal Reserve following meetings of the Federal Open

Market Committee (FOMC) can be found here.

1 The last time the FOMC cut rates was in March

2020, when it stated that, “the Committee decided to lower the target range for the federal funds

rate to 0 to 1/4 percent.” These instructions on how to access the Underlying are provided for

convenience only and are not part of the binding Terms and Conditions of the Contract. They

may be clarified at any time.

Source Agency: The Source Agency is the Federal Reserve Board.

Type: The type of Contract is an Event Contract.

Issuance: This contract will be issued annually.

<date>: <date> refers to a calendar date specified by Kalshi. Kalshi may list iterations of the

Contract corresponding to variations of <date>.

Payout Criterion: The Payout Criterion for the Contract encompasses the Expiration Values that

the Federal Open Market Committee has announced it will reduce the target range for the federal

funds rate.

Minimum Tick: The Minimum Tick size for the referred Contract shall be $0.01.

Position Limit: The Position Limit for the $1 referred Contract shall be $25,0007,000,000 per

Member.

Last Trading Date: The Last Trading Date of the Contract will be the sooner of the date of the

first 10:00 AM ET following the occurrence of an event encompassed in the Payout Criterion

(whereupon the Last Trading Time will be 10:00 AM ET) or <date> (whereupon the Last

Trading Time will be 11:59 PM ET).

1https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

KalshiEX LLC
KalshiEX LLC

Settlement Date: The Settlement Date of the Contract shall be no later than the day after the

Expiration Date, unless the Market Outcome is under review pursuant to Rule 7.1.

Expiration Date: The Expiration Date of the Contract shall be the sooner of the date of the first

10:00 AM ET following the occurrence of an event that is encompassed in the Payout Criterion

or the first 10:00 AM following <date>.

Expiration time: The Expiration time of the Contract shall be 10:00 AM ET.

Settlement Value: The Settlement Value for this Contract is $1.00.

Expiration Value: The Expiration Value is the value of the Underlying as documented by the

Source Agency on the Expiration Date at the Expiration time.

Contingencies: Before Settlement, Kalshi may, at its sole discretion, initiate the Market

Outcome Review Process pursuant to Rule 6.3(c) of the Rulebook. Additionally, as outlined in

Rule 7.2 of the Rulebook, if any event or any circumstance which may have a material impact on

the reliability or transparency of a Contract’s Source Agency or the Underlying related to the

Contract arises, Kalshi retains the authority to designate a new Source Agency and Underlying

for that Contract and to change any associated Contract specifications after the first day of

trading.

KalshiEX LLC