KalshiEX LLC

October 20, 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 Supreme Court rule the CFPB’s method of funding unconstitutional?”

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 Supreme Court rule the CFPB’s method of funding unconstitutional?”

contract (Contract). The Exchange intends to list the contract on a one-time basis. The Contract’s terms

and conditions (Appendix A) includes the following strike conditions:

● <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

Official Product Name: Will the Supreme Court rule the CFPB’s method of funding unconstitutional?

Rulebook: CFPB

Kalshi Contract Category: Political Decision

CFPB Funding Decision

October 20, 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 Supreme Court rule the CFPB’s method of funding unconstitutional?”

Contract is a contract relating to a challenge to the legality of the Consumer Financial

Protection Bureau’s funding. After careful analysis, Kalshi (hereafter referred to as

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

The Consumer Financial Protection Bureau has a unique funding mechanism. Rather than

being provided appropriations by Congress, its funds are allocated from the Federal

Reserve’s membership fees that are charged to member-banks. In October 2022, the Fifth

Circuit appellate court unanimously ruled that this violated the Appropriations Clause of

the Constitution which states, “no money shall be drawn from the Treasury, but in

consequence of appropriations made by law.” The Supreme Court heard oral argument in

the case in fall 2023.

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

KalshiEX LLC
KalshiEX LLC

$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 Supreme Court has ruled that the funding mechanism of the CFPB is

unconstitutional, 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: October 20, 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 Supreme Court rule the CFPB’s method of funding

unconstitutional?

Rulebook: CFPB

KalshiEX LLC
KalshiEX LLC

CFPB

Scope: These rules shall apply to this contract.

Underlying: The Underlying for this Contract is Judgments of the Court and Opinions of the

Court from the Supreme Court of the United States (collectively called “rulings”) in the case of

CFPB v. Community Financial Services Association of America, Limited. Dissenting and

concurring opinions are not included in the Underlying. Revisions to the Underlying made after

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

Instructions: Slip opinions can be found here.

1 Click on Community Financial Services

Association of America. 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 Supreme Court of the United States.

Type: The type of Contract is an Event Contract.

Issuance: The Contract will be issued once.

<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

contain a ruling that states the statute providing funding to the Consumer Financial Protection

Bureau, 12 U.S.C. § 5497, violates the appropriations clause in Article I, Section 9 of the

Constitution. Only initial rulings will be encompassed by the Payout Criterion; remanding the

case to a lower court would not be encompassed by the Payout Criterion.

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 encompassed by 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).

1https://www.supremecourt.gov/opinions/slipopinion/23

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 release of the Supreme Court’s decision or 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