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 number of rate cuts be <count>?” 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 number of rate cuts be <count>?” contract (Contract). The Exchange

intends to list the contract on an annual basis and in conjunction with the Federal Reserve’s cutting cycle.

The Exchange intends to list the contract 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 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

New Contract Submission: Will the number of rate cuts be <count>?

Rulebook: RATECUTS

Kalshi Contract Category: Political Decision

Rate Cut Number

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 number of rate cuts be <count>?” Contract is a contract relating to the

number of Federal Reserve federal funds rate cuts. 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.

The Federal Reserve Bank is currently done (or close to done) with its hiking cycle.

There is uncertainty what the lowest rate that the bank will set as it moves towards

cutting. This contract is intended to capture the risk associated with the trough of the

cutting cycle in a given period.

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 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

KalshiEX LLC
KalshiEX LLC

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 cuts between Issuance

and <date> 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

Official Product Name: Will the number of rate cuts be <count>?

Rulebook: RATECUTS

KalshiEX LLC
KalshiEX LLC

RATECUTS

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is the number of downward changes in the upper

limit of the Federal Funds Target Range between Issuance and <date>, according to the Federal

Open Market Committee of the Federal Reserve (FOMC). A single ‘cut’ is considered an

increase in the upper bound by at least 1 basis point and up to and including 25 basis points. A

cut decreasing the upper bound of the target range greater than 25 basis points is considered two

cuts; a cut decreasing the upper bound of the target range more than 50 basis points is considered

three cuts. Revisions to the Underlying made after Expiration will not be accounted for in

determining the Expiration Value.

Instructions: The changes in the Federal Funds Target Range can be found here.

1 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 Open Market Committee of the Federal

Reserve (FOMC).

Type: The type of Contract is a Binary Contract.

Issuance: The Contract will be issued annually.

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

inclusive range between a maximum value of <20> and a minimum value of <0> at consecutive

increments of <1>. Due to the potential for variability in the Underlying, the Exchange may

modify <number> levels in response to suggestions by Members. Count can also be above or

below a given number to serve as the bottom and top of the Contract’s range.

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

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

are <count>.

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.

1 https://www.federalreserve.gov/monetarypolicy/openmarket.htm

KalshiEX LLC
KalshiEX LLC

Last Trading Date: The Last Trading Date of the Contract will be <date>. 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 one day 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