KalshiEX LLC

November 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 Regulation 40.6(a) Notification Regarding the Amendment

of the “Will the US default on its debt?” 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 US default on its debt?” contract (Contract). This Amendment shall only

apply to iterations of the Contract created after this Amendment is filed and in effect.

This contract is a straight-forward modification to the previous “Will the US default on its debt?”

contract. The changes are as follows:

1. The Contract’s terms has been changed to add that one of the three major ratings agencies

holding the United States in any form of default would be encompassed within the Payout

Criterion. Pursuant to this, the Contract’s Underlying, Source Agencies, and Payout Criterion

where modified (along with appropriate considerations with regards to Core Principle 3).

Along with this letter, Kalshi submitted the following documents:

● A clean copy of the amended Contract; and

● A redline showing the changes to Appendix A from 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 US default on its debt?”

Rulebook: DEFAULT

Kalshi Contract Category: Political decision

U.S. debt default

November 29, 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 US default on its debt?” Contract is a contract relating to the potential

non-repayment of US Treasury debt. After careful analysis, Kalshi (hereafter referred to

as “Exchange”) has determined that the Contract complies with its vetting framework.

The Secretary of the Treasury announced on January 19, 2023 that the United States had

reached the debt ceiling and had now begun undertaking “extraordinary measures”.

Those extraordinary measures will eventually exhaust themselves.

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

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

KalshiEX LLC
KalshiEX LLC

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 with 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 United States Federal Government has failed to make a scheduled payment in full

(including repayment) on at least one debt obligation (this is short-hand; please see

Appendix A in the Rulebook for the legally binding terms and conditions), 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: November 29, 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 US default on its debt?

Rulebook: DEFAULT

KalshiEX LLC
KalshiEX LLC

DEFAULT

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is public statements, announcements, releases,

and issuances from the U.S. Department of the Treasury, including public statements and letters

from the U.S. Secretary of the Treasury issued between Issuance and <date>; as well as the

sovereign debt credit ratings of the United States government according to Standard & Poor’s,

Moody’s, and Fitch between Issuance and <date>. Revisions to the Underlying made after

Expiration will not be accounted for in determining the Expiration Value.

Source Agency: The Source Agencies are the United States Department of the Treasury,

Standard & Poor’s, Moody’s, and Fitch.

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.

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

Contract corresponding to different statistical periods of <date>.

<expo_date>: <expo_date> refers to a calendar date specified by Kalshi. Kalshi may list

iterations of the Contract corresponding to different statistical periods of <expo_date>.

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

contain a statement, announcement, release or issuance from the U.S. Department of the

Treasury that the United States Federal Government failed to make a scheduled payment on a

Treasury note, bond, or bill; or that one of the three major credit ratings agencies consider any

United States debt in any form of default. Scheduled payments include interest payments, and

not just payment of the face value upon maturity.

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 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).

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,

the date of 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
KalshiEX LLC - Confidential

DEFAULT

REDLINE

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is public statements, announcements, releases,

and issuances from the U.S. Department of the Treasury, including public statements and letters

from the U.S. Secretary of the Treasury issued between Issuance and <date>; as well as the

sovereign debt credit ratings of the United States government according to Standard & Poor’s,

Moody’s, and Fitch between Issuance and <date>. Revisions to the Underlying made after

Expiration will not be accounted for in determining the Expiration Value.

Source Agency: The Source Agencies are the United States Department of the Treasury,

Standard & Poor’s, Moody’s, and Fitch.

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.

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

Contract corresponding to different statistical periods of <date>.

<expo_date>: <expo_date> refers to a calendar date specified by Kalshi. Kalshi may list

iterations of the Contract corresponding to different statistical periods of <expo_date>.

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

contain a statement, announcement, release or issuance from the U.S. Department of the

Treasury that the United States Federal Government failed to make a scheduled payment on a

Treasury note, bond, or bill; or that one of the three major credit ratings agencies consider any

United States debt in any form of default. Scheduled payments include interest payments, and

not just payment of the face value upon maturity.

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 first 10:00

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

KalshiEX LLC - Confidential Treatment Under Regulations 40.8 and 145.9 Requested
KalshiEX LLC - Confidential

(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 date of 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 - Confidential Treatment Under Regulations 40.8 and 145.9 Requested