KalshiEX LLC

July 6, 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 the mean Land-Ocean Temperature Index for <year> be

<above/below/between> <value>?” 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 the mean Land-Ocean Temperature Index for <year> be

<above/below/between> <value>?” contract (Contract). The Exchange intends to list the contract on an

annual basis. The Contract’s terms and conditions (Appendix A) includes the following strike conditions:

● <year> (the target year)

● <value> (the target mean Land-Ocean Temperature Index value)

● <above/below/between>

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 the mean Land-Ocean Temperature Index for <year> be <above/below/between>

<value>?

Rulebook: HOTYEAR

Kalshi Contract Category: Weather/Climate

Hottest Years

July 6, 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 mean Land-Ocean Temperature Index for <year> be 

<above/below/between> <value>?” Contract is a contract relating to rising global 

temperatures resulting from anthropogenic climate change. It is designed to enable 

market participants whose businesses or operations are affected by climate change to 

mitigate the commercial risks associated with rising global temperatures. After careful 

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

complies with its vetting framework. 

During the 20th century, Earth’s average temperature increased by approximately 2°F. 

Such temperature increases, though they may seem small, have already affected our 

world: glaciers have melted, sea levels have risen, and heat waves have grown more 

intense. 1 The Intergovernmental Panel on Climate Change (“IPCC”), a consortium of 

over 1,300 scientists from around the world, has projected a temperature increase of 

anywhere from 2.5 to 10°F during the 21st century. 

2 The magnitude of the increase, 

however, will determine the future effects of climate change—including whether sea 

levels will rise by one foot or eight feet, how often the South is hit by extreme heat 

waves, how bad droughts are in the Southwest, and how severe wildfires are in 

California. This Contract allows individuals and corporations to hedge the economic risks 

associated with the pace of global warming, including the risk of flooding, wildfires, and 

extreme weather. 

2 Ibid

1 https://climate.nasa.gov/effects/

KalshiEX LLC 
KalshiEX LLC

The contract is ever more important today given the risks that accelerating climate 

change is bringing to financial markets and the economy. The CFTC’s Market Risk 

Advisory Committee report “Managing Climate Risk in the U.S. Financial System” 

(“MRAC Report”) outlines the criticality of such risks: 

A central finding of this report is that climate change could pose systemic risks to the U.S.

financial system. Climate change is expected to affect multiple sectors, geographies, and assets in

the United States, sometimes simultaneously and within a relatively short timeframe.

3

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 

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 

3 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

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 Land-Ocean Temperature Index Value for <year> is <above/below/between> 

<value>, 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: July 6, 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 mean Land-Ocean Temperature Index for <year> be 

<above/below/between> <value>? 

Rulebook: HOTYEAR 

KalshiEX LLC 
KalshiEX LLC

HOTYEAR

Scope: These rules shall apply to this contract. 

Underlying: The Underlying for this Contract is the set of mean Land-Ocean Temperature Index 

value for all years reported by NASA’s Goddard Institute for Space Studies (GISS) for all years 

beginning in 1880. Revisions to the Underlying made after Expiration will not be accounted for 

in determining the Expiration Value. 

Instructions: The data is available at the table located at the following link: 

https://data.giss.nasa.gov/gistemp/graphs/graph_data/Global_Mean_Estimates_based_on_Land_ 

and_Ocean_Data/graph.txt which has data on global average temperature going back to 1880. 

Specifically, the Underlying is the non-smoothed value of the Land-Ocean Temperature Index, 

which is located in the table column titled “No_Smoothing” along the row that represents the 

year in question. If the URL for the raw data is unavailable, the data can also be found by 

navigating to the GISS Surface Temperature Analysis (v4) 

( https://data.giss.nasa.gov/gistemp/graphs/ ), clicking on “Global Annual Mean Surface Air 

Temperature Change”, and finding the data-point on the graph for the year in question. If there 

are discrepancies between the two ways of accessing the data, the first 

( https://data.giss.nasa.gov/gistemp/graphs/graph_data/Global_Mean_Estimates_based_on_Land_ 

and_Ocean_Data/graph.txt ) will be used. These instructions are provided for convenience only 

and may be modified or clarified at any time. 

Source Agency: The Source Agency is the National Aeronautics and Space Administration 

(“NASA”). 

Type: The type of Contract is an Event Contract. 

Issuance: The Contract is based on the outcome of a recurrent data release, which is issued on an 

annual basis. Thus, Contract iterations will be issued on a recurring basis, and future Contract 

iterations will generally correspond to the next year. 

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

Contract corresponding to variations of <year>. 

<value >: <value> refers to the value of the mean Land-Ocean Temperature Index value for a 

given year. 

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

the value for <year> is <above/below/between> <value>. 

KalshiEX LLC 
KalshiEX LLC

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 last day of <year>. 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 release of the data for all of <date> or the last day of the year 

following <year>. 

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