KalshiEX LLC

August 18, 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 40.2(a) Notification Regarding the Initial Listing

of the “Will a <speed> hurricane hit California?” Contract

Dear Sir or Madam,

Pursuant to Section 5c(c) of the Commodity Exchange Act and Section 40.2(a) of the regulations of the

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

it is self-certifying the “Will a <speed> hurricane hit California?” contract (Contract). The Exchange

intends to list the contract in conjunction with the hurricane season. The contract will be initially listed

after close-of-business on August 18; it is listed as August 19, 2023 because of limitations of the

Commission's online submission portal. The Contract’s terms and conditions (Appendix A) includes the

following strike conditions:

● <date> (target date)

● <speed> (maximum wind speed)

Along with this letter, Kalshi submits the following documents:

● A concise explanation and analysis of the Contract;

● Certification;

● Appendix A with the Contract’s Terms and Conditions;

● Confidential Appendices with further information; and

● A request for FOIA confidential treatment.

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 a <speed> hurricane hit California?

Rulebook: HURCAL

Kalshi Contract Category: Weather/Climate

California hurricane

August 18, 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 a <speed> hurricane hit California?” Contract is a contract relating to 

maximum sustained wind speeds of storms hitting California. After careful analysis, 

Kalshi (hereafter referred to as “Exchange”) has determined that the Contract complies 

with its vetting framework. 

Climate change has increased the incidence of tropical storms and hurricanes, something 

the Commission has emphasized in its 2020 MRAC report. 1 Tropical storms and 

hurricanes can disrupt essential services and utilities like hospitals, water lines, and 

electricity, displace individuals, destroy homes, and lower property values of affected 

areas. Climate change may, scientists report, both increase the frequency of tropical 

cyclones and increase their severity. “Since 1975,” a 2013 study concludes, “there has 

been a substantial and observable regional and global increase in the proportion of 

Cat[egory] 4-5 hurricanes of 25-30 percent per °C of anthropogenic (human-caused) 

global warming.” 2 Naturally, the larger the size of the hurricane, the larger the economic 

impact. The Contract allows affected individuals, businesses, and other investors to hedge 

the risk that a hurricane or tropical storm poses to their livelihood. 

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. 

2 Holland, G., Bruyère, C.L. Recent intense hurricane response to global climate change. Clim Dyn 42, 617–627

(2014). https://doi.org/10.1007/s00382-013-1713-0

1 https://www.cftc.gov/sites/default/files/2020-09/9-9-20%20Report%20of%20the%20Subcommittee%20on%20Cli

mate-Related%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%2

0System%20for%20posting.pdf

KalshiEX LLC 
KalshiEX LLC

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 

limits (defined as maximum loss exposure) of $25,000 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. A new Source Agency can be added via a Part 40 amendment. 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 maximum sustained wind speeds are at least <speed> in California 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: August 18, 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 a <speed> hurricane hit California? 

Rulebook: HURCAL 

KalshiEX LLC 
KalshiEX LLC

HURCAL

Scope: These rules shall apply to this contract. 

Underlying: The Underlying for this Contract is: 

● The set of maximum sustained wind speeds recorded in California for each day from 

Issuance until <date> (inclusive) according to the Daily Climate Reports for Weather 

Forecast Offices from the National Weather Service located in California. This also 

includes the weather station for El Centro (Imperial California) that is headquartered in 

Phoenix, Arizona. 

● The set of maximum sustained wind speeds recorded in locations within the state of 

California between Issuance and <date> (inclusive) included in the set of Post-Storm 

Hurricane Reports issued by the National Weather Service. (Any speed of 999 should be 

ignored, as it represents a missing value and not a wind speed of 999 knots or miles per 

hour). 

Revisions to the Underlying made after Expiration will not be accounted for in determining the 

Expiration Value. 

Instructions: The list of NWS Weather Forecast Offices can be found here . 

3 The Underlying is 

in the Daily Climate Report section for a given office labeled “Wind (MPH)” with the row 

labeled “HIGHEST WIND SPEED”. Please note that the Underlying is not the value in the row 

labeled “HIGHEST GUST SPEED”. 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 Source Agency is the National Oceanic and 

Atmospheric Administration’s National Weather Service. 

Type: The type of Contract is an Event Contract. 

Issuance: After the initial Contract, Contract iterations will be listed on an as-needed basis at the 

discretion of the Exchange and corresponding to the risk management needs of Members. The 

Contract will be listed in conjunction with the hurricane season. 

<speed>: Kalshi may list iterations of the Contract with <speed> levels that fall within an 

inclusive range between 0 and 300 at consecutive increments of 1. Due to the potential for 

variability in the Underlying, the Exchange may modify <speed> levels in response to 

suggestions by Members. 

3 https://forecast.weather.gov/product.php?site=CHS&product=CLI&issuedby=SAV

KalshiEX LLC 
KalshiEX LLC

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

Contract corresponding to different statistical periods of <date>. 

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

contains a value that is greater than or equal to <speed>. 

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 $25,000 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 that is 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. 

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, 

the first 10:00 AM ET following the release of the data for all of <date>, or one week after 

<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. 

KalshiEX LLC