KalshiEX LLC

December 14, 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 Fed hike rates by <date>?” 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 Fed hike rates by <date>?” contract (Contract). The Contract will be

issued on an annual basis. The contract will be initially listed after close-of-business on December 14; it

is listed as December 15 because of limitations of the Commission's online submission portal.The

Contract’s terms and conditions (Appendix A) includes the following strike conditions:

● <date> (the target date)

Along with this letter, Kalshi submitted 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 Fed hike rates by <date>?

Rulebook: FEDHIKE

Kalshi Contract Category: Political Decision

Federal Reserve Hike Again

December 14, 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 Fed hike rates by <date>?” Contract is a contract relating to the number of

Federal Reserve federal funds rate hikes. 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.

This information is highly valuable to financial institutions, as the federal funds rate

directly affects the cost of borrowing in the multi-trillion-dollar federal funds market1.

These rate changes also impact inflation (higher rates relative to the neutral rate will tend

to lower inflation) and nominal GDP and are thus highly valuable to firms and

individuals.

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.

1https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/2017-economic-comm

entaries/ec-201707-the-federal-funds-market-since-the-financial-crisis.aspx#:~:text=It%20consists%20of%20%242.

46%20trillion,trillion%20in%20mortgage%2Dbacked%20securities.

KalshiEX LLC
KalshiEX LLC

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

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 $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. 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 number of federal funds rate hikes in <year> is

<count>, 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: December 14, 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

TERMS OF CONTRACTS TRADED ON KALSHI

Official Product Name: Will the Fed hike rates by <date>?

Rulebook: FEDHIKE

KalshiEX LLC
KalshiEX LLC

FEDHIKE

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.

2 The last time the FOMC raised rates was in July

2023, when it stated that, “ the Committee decided to raise the target range for the federal funds

rate to 5-1/4 to 5-1/2 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 has increased 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.

2https://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.

KalshiEX LLC