KalshiEX LLC

September 29, 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 Emergency Rule Filing Regarding Contracts whose Source

Agencies may be affected by a lapse in federal government appropriations

Dear Sir or Madam,

KalshiEX LLC (Kalshi) is adopting an emergency rule regarding contracts whose Source

Agencies may be affected by a lapse in federal government appropriations. An extended period

of government shutdown could delay release of major scheduled economic and other data by

federal government agencies, such as the inflation rate as published by the Bureau of Labor

Statistics. Kalshi offers event contracts on a number of these data releases (e.g. what the inflation

rate will be in September 2023). These contracts cease trading prior to the expected release of the

data, and provide a backstop of, at minimum, one week for issues that could delay the underlying

data. Agencies have discussed the potential of a government shutdown and it has been reported

in the major business press. Without a change, all contracts will settle to “No” if no data is

released by the latest Expiration Date.

On September 25, 2023, Kalshi filed a 40.6(a) non-emergency rule amendment regarding the

same issue, also invoking Rule 7.2 of its Rulebook, which permits Kalshi to modify Contract

Source Agencies, as well as contract specifications, in response to an event affecting the

reliability of a Source Agency. On September 26, 2023, Kalshi amended the copy of the filing

that was posted to its website to note that members expressed opposition to the filing. On

September 28th, 2023, Kalshi withdrew the filing because it stated that Kalshi’s members had

not expressed opposition. However, several of Kalshi’s members had expressed opposition to

Kalshi’s proposal prior to filing. Accordingly, Kalshi withdrew that filing. Additionally, if Kalshi

were to certify a 40.6(a) non-emergency rule amendment, a federal government shutdown due to

a lapse in appropriations could result in a delay of implementation of that rule because of the

impact a shutdown would have on the CFTC itself. Thus, Kalshi is adopting this rule as an

emergency rule.

KalshiEX LLC
KalshiEX LLC

Emergency rule procedures are outlined in Rule 2.8 in Kalshi’s Rulebook, including the reasons

why Kalshi may file an emergency rule. Specifically, it notes:

For the purposes of this Rule, an “emergency” is:

(1) Any activity that manipulates or attempts to manipulate a Contract on the Platform;

(2) Any circumstance that may materially affect the performance of the Contracts traded on Kalshi;

(3) Any action taken by the United States, any foreign government, any state or local governmental body,

any other contract market or board of trade, or any other exchange, market, facility, or trade association

(foreign or domestic) that may have a direct impact on trading on Kalshi;

(4) Any circumstances that may have a severe, adverse impact upon the physical functions of Kalshi

including, for example, natural disasters such as fire or flood, terrorist acts such as bomb threats, 15

physical plant breakdowns such as plumbing, heating, or air conditioning problems, system breakdowns

such as power, telephony, cable, trading systems, or computer systems failures or interruptions to

communications, the network, or the Internet;

(5) The imposition of any injunction or other restraint by any government agency, court, or arbitrator that

may affect the ability of a Member to perform on Contracts;

(6) Any circumstance in which it appears that a Kalshi Member or any other person is in such operational

condition, or is conducting business in such a manner, that such person cannot be permitted to continue in

business without jeopardizing the safety of Kalshi Members or Kalshi itself; and

(7) Any other unusual, unforeseeable, and adverse circumstance which, in the opinion of the governing

board, requires immediate action and threatens or may threaten such things as the fair and orderly trading

in, or the liquidation of or delivery pursuant to Contracts traded on Kalshi.

After careful consideration, Kalshi has concluded that both the impact of a government shutdown

on the CFTC, and the impact of a government shutdown on Contracts’ Source Agencies, qualify

as emergencies under the above criteria. To that end, Kalshi is permitted to modify Contracts’

terms and conditions and/or specifications. Kalshi is adopting an emergency rule that provides

for all contracts that: “In the case of a delay in data caused by a federal government shutdown

impacting the reliability of the Source Agency, the market’s latest Expiration Date will be

extended to the sooner of the release of the Underlying or six months after the end of the

government shutdown.” The six months following the end of the shutdown which delayed data

originally is to provide more than enough time for agencies to release data for the relevant

period, and to ensure that the contract does not extend beyond a reasonable time. Notice of this

change will be posted on the Kalshi website.

Compliance with Core Principles

This change complies with the Core Principles. The contingency will not increase the Contracts’

susceptibility to manipulation, per Core Principle 3; if anything, this will reduce the Contracts’

susceptibility to manipulation by reducing the ability of a separate action (a government

shutdown) to affect the value of the Contracts. It also complies with Core Principle 4. This rule

will reduce disruption by reducing uncertainty regarding Contract outcome due to an event

unrelated to the core of the Underlying (e.g. the inflation rate).

KalshiEX LLC
KalshiEX LLC

The changes in this filing similarly comply with the remaining Core Principles, the Commodity

Exchange Act and Regulations thereunder.

Kalshi has received objections from several Members about this rule. The objections are:

1. That terms and conditions for some of the Contracts involved (e.g. the “CPI” contract)

explicitly note that if no data is available then the markets resolve to No.

2. In the past, Kalshi has not invoked Rule 7.2 when data is delayed.

3. That Rule 7.2 only covers changes in Source Agencies, not changes in Contract

specifications.

After careful consideration, Kalshi concluded that the Rule amendment is the correct course of

action to take. Kalshi markets do resolve to No if no data is available; however, Kalshi does have

the ability from Rule 7.2 to adjust Source Agencies and contract specifications under specific

circumstances. Moreover, not all delays are due to circumstances which cause the Source

Agency to be unreliable or untransparent. For example, an awards show rescheduling their show

for better ratings is not an example of an unreliable Source Agency – it is an intentional choice

for better ratings. Thus, a Contract on an awards show outcome would likely resolve to “No” in

that case, and 7.2 would not be appropriately invoked. Finally, the language in Rule 7.2 notes

that contract specifications are included in the scope of the Rule.

Accordingly, Kalshi certifies that this rule complies with the Commodity Exchange Act and

Regulations thereunder. A copy of the submission, concurrent with the filing of a submission

with the Commission, was posted on the Kalshi’s website. Kalshi also received the pre-requisite

approvals required of an emergency rule filing, including approval by the CEO and its

independent Board members.

Kalshi intends to implement the changes described in this filing beginning September 30, 2023.

If you have any questions or comments or require further information, please do not hesitate to

contact me.

Sincerely,

Xavier Sottile

Head of Markets

KalshiEX LLC

xsottile@kalshi.com

Enclosures:

Appendix A - Contracts that may be affected by a lapse in federal government appropriations

KalshiEX LLC
KalshiEX LLC

APPENDIX A

Contracts that may be affected by a lapse in federal government

appropriations

The following Contracts use the Bureau of Labor Statistics, Bureau of Economic Analysis, or

U.S. Census Bureau as Source Agencies, and thus their data releases may be affected by an

extended lapse in federal government appropriations:

- Will the Consumer Price Index (CPI) increase more than <percent>? (“CPI”)

- Will real GDP <increase/decrease> by more than <percent>? (“GDP”)

- Will the price of apparel change by <above/below/between> <percent> in

- <period>? (“CPIAPPAREL”)

- Will the price of used cars and trucks change by <above/below/between>

- <percent> in <period>? (“USEDCAR”)

- Will the price of food change by <above/below/between> <percent> in

- <period>? (“CPIFOOD”)

- Will core CPI growth be <above/below/between> <percent> in <month>? (“CORECPI”)

- Will core inflation be <above/below/between> <percent> for the 12 months

- ending <month>? (“YOYCPICORE”)

- Will year-over-year inflation for the year ending <month> be

- <above/below/between> <percent>? (“YOYCPI”)

- Will PPI growth be <above/below/between> <percent> in <period>? (“PPI”)

- Will core Personal Consumption Expenditures price index inflation be

<above/below/between> <percent> in <month>? (“COREPCE”)

- Will nonfarm payroll change be <above/below/between> <count>? (“PAYROLLS”)

- Will the unemployment rate (U-3) be above <percent>? (“U3”)

- Will retail sales be <above/below/between> <percent> in <month>? (“RETAIL”)

- Will any quarterly U.S. GDP growth be <above/below> <percent> this year? (“LGDP”)

- Will any monthly U.S. unemployment rate be <above/below> <percent> this year?

(“LU3”)

- Will any monthly U.S. inflation be <above/below> <percent> this year? (“LCPI”)

- Will there be an official recession in <period>? (“NBERRECSS”)

- Will the PPI value for semiconductors be <above/below> <value> in <month>?

(“SEMIPPI”)

KalshiEX LLC