KalshiEX LLC

September 5, 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 a tornado, earthquake, flood, or hurricane affect San Francisco?” 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 a tornado, earthquake, flood, or hurricane affect San Francisco?” contract

(Contract). The contract will be initially listed after close-of-business on September 5, 2023; it is listed as

September 6, 2023 because of limitations of the Commission's online submission portal.The Exchange

intends to list the contract on an annual basis. The Contract’s terms and conditions (Appendix A) includes

the following strike conditions:

● <date> (the target date)

● <wind_speed> (the target wind speed)

● <magnitude> (the target earthquake magnitude)

● <count> (the number of miles the earthquake is near San Francisco)

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 a tornado, earthquake, flood, or hurricane affect San Francisco?

Rulebook: EMERGENCYSF

Kalshi Contract Category: Weather/Climate

Natural Disasters SF

September 5, 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 a tornado, earthquake, flood, or hurricane affect San Francisco?” Contract is a 

contract relating to whether any of a series of natural disasters will affect San Francisco. 

After careful analysis, Kalshi (hereafter referred to as “Exchange”) has determined that 

the Contract complies with its vetting framework. 

Natural disasters – such as hurricanes, earthquakes, tornadoes, floods – can have 

devastating impacts on cities. In 2022, according to the National Centers for 

Environmental Information, “Tropical cyclones have caused the most damage ($1,333.6 

billion) and have the highest average event cost ($22.2 billion per event). Drought 

($327.7 billion), severe storms ($383.7 billion), and inland flooding ($177.9 billion) have 

also caused considerable damage based on the list of billion-dollar events.” 1 Moreover, 

the incidence of such events is expected to increase due to climate change. 2

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. 

2 https://www.usgs.gov/faqs/how-can-climate-change-affect-natural-disasters#:~:text=With%20increasing%20global

%20surface%20temperatures,more%20powerful%20storms%20to%20develop.

1 https://www.climate.gov/news-features/blogs/beyond-data/2022-us-billion-dollar-weather-and-climate-disasters-hist

orical#:~:text=Tropical%20cyclones%20have%20caused%20the,list%20of%20billion%2Ddollar%20events.

KalshiEX LLC 
KalshiEX LLC

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. 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 an eligible event has occurred between Issuance and <date> that affects San 

Francisco, 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: September 5, 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 a tornado, earthquake, flood, or hurricane affect San 

Francisco? 

Rulebook: EMERGENCYSF 

KalshiEX LLC 
KalshiEX LLC

EMERGENCYSF

Scope: These rules shall apply to this contract. 

Underlying: The Underlying for this Contract is maximum sustained wind speeds recorded at 

Downtown San Francisco, CA as published by the National Weather Service, tornado, flash 

flood, and flood warnings for San Francisco as published by the National Weather Service, and 

earthquake magnitudes according to the U.S. geological survey. Revisions to the Underlying 

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

Instructions: The weather office, where sustained windspeeds can be found, can be found here . 

3

Tornado, flash flood, and flood warnings can be found here. 4 Recent earthquakes can be found 

here . 

5 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 Agencies are the National Weather Service and the U.S. Geological 

Survey. 

Type: The type of Contract is an Event Contract. 

Issuance: The Contract will be issued on an annual basis corresponding to end-of-year. If the 

market resolves before the year is over, another will be launched, again with a target date of 

end-of-year. 

<wind_speed>: Kalshi may list iterations of the Contract with <wind_speed> levels that fall 

within an inclusive range between 0 and 300 at consecutive increments of <1>. Due to the 

potential for variability in the Underlying, the Exchange may modify <wind_speed> levels in 

response to suggestions by Members. 

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

an inclusive range between 0 and 10 at consecutive increments of <0.01>. Due to the potential 

for variability in the Underlying, the Exchange may modify <magnitude> levels in response to 

suggestions by Members. 

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

inclusive range between 0 and 1,000 at consecutive increments of <1>. Due to the potential for 

5 https://earthquake.usgs.gov/earthquakes/map/?extent=11.1784,-142.55859&extent=58.21702,-47.37305

4 https://www.weather.gov/alerts

3 https://forecast.weather.gov/product.php?site=LOX&product=CLI&issuedby=CQT

KalshiEX LLC 
KalshiEX LLC

variability in the Underlying, the Exchange may modify <count> levels in response to 

suggestions by Members. 

<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 

one of the following has occurred between Issuance and <date>: 

- Wind speeds of at least <wind_speed> were recorded at Downtown San Francisco, CA; 

or 

- A flash flood, flood, or tornado warning has been issued for at least part of San 

Francisco; 

- A <magnitude> earthquake occurs within <count> miles of San Francisco. This 

information can be found in the ‘Nearby Places’ list under ‘Regional Information’ on the 

USGS page for a given earthquake. 

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). 

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. 

KalshiEX LLC