USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 1 of 22
`
`ORAL ARGUMENT NOT YET SCHEDULED
`No. 24-5205
`In the United States Court of Appeals
`for the District of Columbia Circuit
`
`
`
`
`
`
`
`
`
`
`
`
`
`KALSHIEX LLC,
`Plaintiff-Appellee,
`
`
`
`
`v.
`U.S. COMMODITY FUTURES TRADING COMMISSION,
`Defendant-Appellant.
`
`
`
`
`
`
`
`
`
`
`
`
`
`On Appeal from the U.S. District Court
`for the District of Columbia
`Case No. 1:23-cv-03257-JMC (Hon. Jia M. Cobb)
`
`BRIEF FOR AMICUS CURIAE PARADIGM OPERATIONS LP
`IN SUPPORT OF KALSHIEX LLC AND AFFIRMANCE
`
`
`
`Joshua P. Morrow
`LEHOTSKY KELLER COHN LLP
`408 W. 11th St., 5th Floor
`Austin, TX 78701
`
`
`
`ScoW A. Keller
`LEHOTSKY KELLER COHN LLP
`200 MassachuseWs Ave. NW, Suite 700
`Washington, DC 20001
`(512) 693-8350
`scoW@lkcfirm.com
`
`
`Counsel for Amicus Curiae
`Paradigm Operations LP
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 2 of 22
`
`CERTIFICATE OF PARTIES, RULINGS, AND RELATED CASES
`PURSUANT TO CIRCUIT RULE 28(A)(1)
`
`A. Parties and Amici
`
`All parties in this Court are listed in the Brief of Appellant the U.S.
`
`Commodity Futures Trading Commission. In addition to this amicus brief,
`Better Markets, Inc., Jeremy D. Weinstein, and Professor Joseph A.
`
`Grundfest have each filed (or indicated their intent to file) an amicus brief.
`
`B. Rulings under Review
`The ruling under review is the district court’s order issued September 6,
`
`2024, and memorandum opinion issued September 12, 2024, in KalshiEx LLC
`
`v. CFTC, No. 23-cv-03257 (D.D.C.).
`
`C. Related Cases
`
`There are no cases related to this appeal.
`
`
`
`
`ii
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 3 of 22
`
`CORPORATE DISCLOSURE STATEMENT
`Under Federal Rule of Appellate Procedure 26.1 and D.C. Circuit Rule
`
`26.1, amicus curiae Paradigm Operations LP makes the following disclosure
`for the limited purpose of complying with the relevant rules: Paradigm
`
`Operations LP has no parent corporation. There is no publicly held
`
`corporation that owns 10% or more of Paradigm Operations LP. Paradigm
`Operations LP reserves the right to supplement this disclosure statement if
`
`needed.
`
`
`
`
`iii
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 4 of 22
`
`
`
`TABLE OF CONTENTS
`
`Page
`
`
`Certificate of Parties, Rulings, and Related Cases Pursuant to
`Circuit Rule 28(a)(1) ......................................................................................... ii
`Corporate Disclosure Statement ......................................................................... iii
`Table of Authorities ............................................................................................... v
`Interest of Amicus Curiae ................................................................................... vii
`Statement of Counsel ........................................................................................... vii
`Statutes and Regulations ................................................................................... viii
`Introduction and Summary of Argument .......................................................... 1
`Argument ................................................................................................................ 2
`I. Control Contracts serve the public interest by helping
`businesses and individuals hedge financial risk. ................................ 2
`A. Congressional action or inaction poses inherent
`financial risk. ...................................................................................... 3
`B. Control Contracts allow stakeholders to hedge against
`the aggregate and granular risks that flow from
`partisan control. ................................................................................. 5
`C. Control Contracts can also help hedge risks that are
`independent of official Congressional action. ............................... 7
`II. Event markets for Control Contracts serve the public
`interest by offering an accurate and useful predictive tool. ............... 8
`A. Event markets give an up-to-the-minute prediction of
`political outcomes. ............................................................................. 9
`B. Predictions of political outcomes are useful for many
`purposes. ........................................................................................... 11
`Conclusion ............................................................................................................ 13
`Certificate of Service ............................................................................................ 14
`Certificates of Compliance .................................................................................. 14
`
`iv
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 5 of 22
`
`TABLE OF AUTHORITIES
`
`
`Page(s)
`
`Case
`Harris v. U.S. Dep’t of Veterans Affs.,
`776 F.3d 907 (D.C. Cir. 2015) ......................................................................... 12
`
`Legislation
`
`26 U.S.C. § 6045 ...................................................................................................... 5
`
`26 U.S.C. § 6045-45A .............................................................................................. 5
`
`26 U.S.C. § 6050I ..................................................................................................... 5
`
`Agriculture Improvement Act of 2018,
`Pub. L. No. 115-334, 132 Stat. 4490 (2018) ...................................................... 3
`
`Clarity for Payment Stablecoins Act,
`H.R. 4766, 118th Cong. (2023) ......................................................................... 4
`
`Financial Innovation and Technology for the 21st Century Act,
`H.R. 4763, 118th Cong. (2023) ......................................................................... 4
`
`Further Continuing Appropriations and Other Extensions Act,
`Pub. L. No. 118-22, H.R. 6363 (2024) .............................................................. 3
`
`Infrastructure Investment and Jobs Act.,
`Pub. L. No. 117-58, 135 Stat. 429 (2022) .......................................................... 5
`
`Medicare Prescription Drug, Improvement, and Modernization Act,
`Pub. L. No. 108-173, 117 Stat. 2066 (2003) ...................................................... 7
`
`Proving Reserves of Others’ Funds Act,
`S.3087, 118th Cong. (2023) ............................................................................... 4
`
`v
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 6 of 22
`
`Regulations
`
`Gross Proceeds and Basis Reporting by Brokers and Determination of
`Amount Realized and Basis for Digital Asset Transactions,
`88 Fed. Reg. 59,576 (proposed Aug. 29, 2023) ............................................... 5
`
`Other Authorities
`
`Allison Morrow, How prediction markets saw something the polls
`and pundits didn’t, CNN Business (Nov. 8, 2024),
`https://perma.cc/L398-Y7LN ......................................................................... 10
`
`Kelly Cloonan, Betting markets nailed Trump’s decisive win — and
`it’s a good reminder they can be more accurate than polls,
`Business Insider (Nov. 9, 2024), https://perma.cc/4C85-97P6 ................... 10
`
`Jason Furman, Comment Letter on KalshiEx Proposed
`Congressional Control Contracts Under CFTC Regulation 40.11,
`(Sept. 18, 2022), https://perma.cc/TD76-9HMU .......................................... 12
`
`Michael J. de la Merced, Political Betting Markets See Vindication
`in Trump Victory, N.Y. Times (Nov. 6, 2024),
`https://tinyurl.com/46hafuf7 ........................................................................... 8
`
`Overview of the Medicare Prescription Drug, Improvement, and
`Modernization Act of 2003 (Dec. 6, 2004),
`https://perma.cc/QWZ7-RVXN ....................................................................... 7
`
`President’s Radio Address (May 18, 2002),
`https://perma.cc/RCB2-QBSX .......................................................................... 7
`
`@NateSilver538, X (Jan. 13, 2024),
`https://perma.cc/WD4X-YRGA ..................................................................... 10
`
`
`
`
`vi
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 7 of 22
`
`INTEREST OF AMICUS CURIAE
`Paradigm Operations LP is a research driven crypto investment firm that
`
`backs entrepreneurs, companies, and protocols at the frontier of innovation.
`Paradigm has an interest in this case because prediction markets are an
`
`exciting application of crypto technology and are driving innovation in a
`
`field in which Paradigm invests. See, e.g., Ciamac Moallemi & Dan Robinson,
`pm-AMM: A Uniform AMM for Prediction Markets, Paradigm (Nov. 5, 2024),
`
`https://perma.cc/V7JZ-LGL6 (“Prediction markets are an increasingly
`
`popular application in crypto.”). Paradigm also has an interest in supporting
`the broad availability of regulated prediction markets, which are a valuable
`
`source of public information and allow market participants (including
`
`crypto investors and entrepreneurs) to hedge exposure to specific events.
`
`STATEMENT OF COUNSEL
`No counsel for any party authored this brief in whole or in part, and no
`entity or person, aside from amicus curiae, its members, or its counsel, made
`
`any monetary contribution intended to fund the preparation or submission
`
`of this brief. See Fed. R. App. P. 29(a)(4)(E). Counsel for Appellant and
`Appellee consent to the filing of this amicus brief. See Fed. R. App. P. 29(a)(2);
`
`D.C. Cir. R. 29(b).
`
`Paradigm is aware that other amici curiae may file amicus briefs.
`Pursuant to D.C. Circuit Rule 29(d), counsel for Paradigm certifies that a
`
`separate brief is necessary. Given the significant differences in the interests
`
`of Paradigm and other potential amici, and given the distinct interests that
`
`vii
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 8 of 22
`
`Paradigm and the other amici have in this case and the distinct issues they
`intend to brief, it is impracticable to collaborate in a single brief. Paradigm
`
`believes that the Court will benefit from the presentation of multiple
`
`perspectives. And, to respect this Court’s and the parties’ resources,
`Paradigm has sought to present its arguments in as succinct a fashion as
`
`possible. Accordingly, this brief is only 2,705 words, which is well below the
`
`6,500 words allowed by the Federal Rules of Appellate Procedure for an
`amicus curiae brief.
`
`STATUTES AND REGULATIONS
`All applicable statutes and regulations are contained in Appellant’s
`
`Brief.
`
`viii
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 9 of 22
`
`INTRODUCTION AND SUMMARY OF ARGUMENT
`A lot rides on U.S. Congressional elections: countless pieces of
`
`legislation, spending provisions, and confirmations of executive and judicial
`nominees become more, or less, likely. The uncertainty of these potential
`
`outcomes creates risks for businesses and individuals. Event contracts—like
`
`the ones Plaintiff KalshiEx LLC lists on its exchange—advance at least two
`public interests. First, they allow parties directly impacted by political
`
`outcomes to mitigate risk by hedging. Second, they provide information that
`
`the public can use to better predict, and thus plan for, a given outcome.
`Consider an entrepreneur who is building a cryptocurrency startup in
`
`the U.S. The likelihood that Congress will pass legislation impacting the
`
`viability of U.S.-based crypto startups is directly affected by which
`legislators control Congress and whether control of the Legislative Branch is
`
`divided among political parties. The entrepreneur may therefore want to
`
`buy an event contract that pays out depending on which party takes control
`of Congress to hedge its regulatory risk. When market participants hedge
`
`substantial sums on a particular event contract, members of the general
`
`public—even those who never join the market—get valuable real-time
`information. Event markets might even be better predictors of electoral
`
`outcomes than public opinion polling—precisely because they involve
`
`participants who have put their own money on the line.
`
`1
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 10 of 22
`
`Event contracts tied to Congressional control are a win-win. The entities
`who stand to lose most from one political outcome can mitigate their risk.
`
`And the public at large gains insight into what industry insiders expect.
`
`The district court was correct to conclude that the U.S. Commodity
`Futures Trading Commission “exceeded its statutory authority” by issuing
`
`an order that prohibited KalshiEx LLC from “offer[ing] event contracts that
`
`would allow participants to take positions and trade on the outcome of
`United States congressional elections.” App. 93-94. The district court granted
`
`summary judgment because these event contracts “do not involve unlawful
`
`activity or gaming.” App. 94. The Commission also acted arbitrarily and
`capriciously by concluding that these contracts are contrary to the public
`
`interest. See App. 94 (acknowledging this argument but declining to consider
`
`it). The public has a strong interest in accessing the event contracts listed on
`Kalshi’s exchange. Allowing Congressional Control Contracts to trade at
`
`scale on regulated platforms such as Kalshi’s will ensure that these
`
`important markets develop with investor protections and systemic integrity.
`The Court should affirm.
`
`ARGUMENT
`I. Control Contracts serve the public interest by helping businesses
`and individuals hedge financial risk.
`Congressional power manifests in ways that create risk at aggregate and
`
`granular levels. Congressional Control Contracts provide a mechanism for
`
`2
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 11 of 22
`
`market participants to mitigate those risks in ways that event contracts tied
`to specific policy outcomes do not.
`A. Congressional action or inaction poses inherent financial risk.
`The U.S. Congress wields many powers. The uncertainty surrounding
`
`how Congress will wield those powers is compounded by the uncertainties
`
`of future partisan control. Anyone subject to Congressional action—which
`is everyone in America—has an interest in mitigating the risks associated
`
`with different potential outcomes.
`
`Legislation. Congress’s duty is to legislate: to create, amend, and repeal
`laws. Those laws can have drastic financial effects. Consider the “Farm Bill,”
`
`which is a multiyear law that regulates several agricultural and food
`
`programs. The current Farm Bill includes provisions that guarantee that
`farmers can earn at least a minimum revenue for some crops. E.g.,
`
`Agriculture Improvement Act of 2018, Pub. L. No. 115-334, 132 Stat. 4490,
`
`4509 (2018); see Further Continuing Appropriations and Other Extensions
`Act, Pub. L. No. 118-22, H.R. 6363, (2024) (extending programs authorized
`
`by the 2018 Farm Bill). But there is no guarantee that those provisions will
`
`be part of the next Farm Bill—or that there will even be such a bill. That
`uncertainty creates financial risk for any farmer who relies on the Farm Bill’s
`
`guarantees.
`
`Another example is the potential passage of a crypto market structure
`bill. Various proposed bills have been introduced on a bi-partisan basis. See,
`
`3
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 12 of 22
`
`e.g., Financial Innovation and Technology for the 21st Century Act, H.R.
`4763, 118th Cong. (2023); Proving Reserves of Others’ Funds Act, S.3087,
`
`118th Cong. (2023); Clarity for Payment Stablecoins Act, H.R. 4766, 118th
`
`Cong. (2023). But the probability of any bill becoming law is influenced by
`which party is in control of Congress. Going back to the earlier example of a
`
`U.S.-based crypto entrepreneur, the uncertainty as to which party will
`
`control Congress will have a direct effect on the probability of market
`structure regulation being adopted and will have meaningful impact on
`
`financial risk for the startup.
`
`Confirmations. Beyond legislation, each chamber of Congress has
`specific power to take independent action. The Senate, for instance, holds
`
`the exclusive power to confirm Presidential nominees for the Judicial and
`
`Executive branches. For example, certain energy companies face different
`prospects depending on whether the Senate confirms Interior Department
`
`nominees who support or oppose expanded drilling permits. And a private
`
`business’s ability to be acquired may be meaningfully affected by who the
`Senate confirms as Chair of the Federal Trade Commission and their views
`
`on their scope of antitrust authority. Therefore, anyone with an interest in
`
`who serves as the next Chair of the Federal Trade Commission, or as the
`Secretary of Agriculture, or as the Chair of the Securities and Exchange
`
`Commission has an interest in the Senate’s composition.
`
`Taxation. The House of Representatives has distinct powers, too.
`Notably, bills for raising revenue must originate in the House. For example,
`
`4
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 13 of 22
`
`in 2021, a Democratic-controlled Congress passed the Infrastructure
`Investment and Jobs Act., Pub. L. No. 117-58, 135 Stat. 429 (2022). This
`
`legislation included two tax revenue provisions that specifically address
`
`crypto. See 26 U.S.C. § 6045-45A (authorizing rulemaking that requires
`brokers to report sales of digital assets to the IRS); id. § 6050I (requiring
`
`businesses to treat digital assets as cash in transactions involving over
`
`$10,000). But, if implemented, these provisions are likely to cost the crypto
`industry tens, if not hundreds, of millions of dollars. See, e.g., Gross Proceeds
`
`and Basis Reporting by Brokers and Determination of Amount Realized and Basis
`
`for Digital Asset Transactions, 88 Fed. Reg. 59,576, 59,619 (proposed Aug. 29,
`2023) (to be codified at 26 C.F.R. pts. 1, 31, and 301) (estimating that, for
`
`reporting requirements under 26 U.S.C. § 6045, “start-up costs” alone will
`
`reach “$749,925,000”).
` The likelihood of the next Congress passing any legislative fixes or
`
`alterations to these two provisions depends significantly on who controls
`
`Congress. Congressional Control Contracts therefore provide a way for
`affected crypto
`firms
`to hedge
`their exposure
`to
`the potential
`
`implementation of these provisions.
`B. Control Contracts allow stakeholders to hedge against the
`aggregate and granular risks that flow from partisan control.
`Against that backdrop, Congressional Control Contracts offer the public
`
`significant value in at least two respects. First, they allow stakeholders to
`
`hedge against the aggregate risks that come with one party’s control of
`
`5
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 14 of 22
`
`Congress. Who wields the powers of Congress matters enormously across
`innumerable areas of public life. Second, Control Contracts permit hedging
`
`against specific policy outcomes. Both major political parties offer legislative
`
`agendas. Congressional Control Contracts allow stakeholders to mitigate the
`risks associated with the implementation of those agendas writ large.
`
`1. Control Contracts allow parties to hedge aggregate risk.
`When Congressional power shifts from one party to the other, the
`financial risks facing businesses and individuals shift too. But each specific
`
`risk may not always be knowable beforehand. As described above, changes
`
`in Congressional control can create aggregate risk in a myriad of ways,
`including through legislation, nominations, taxation, and more. That is true
`
`even when the change in control does not materially increase the risk of any
`
`particular legislative outcome.
`Take, for example, a venture capital firm that invests in multiple
`
`different types of industries. That firm may be able to mitigate risk through
`
`multiple independent hedges—for example, one regarding the EPA’s car
`emission standards, and another about the potential regulation of crypto.
`
`That firm can consolidate its risk mitigation by purchasing Congressional
`
`Control Contracts. This transaction is more straightforward than purchasing
`multiple hedges across multiple markets. The single transaction also allows
`
`the firm to hedge against risks that it cannot precisely forecast, or for which
`
`there is no other hedge available. Such contracts give financial force to the
`truism that one Congress (or chamber) that seeks to aggressively regulate a
`
`6
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 15 of 22
`
`particular industry can use its broad powers to undermine that industry in
`several ways. So too for a Congress that supports a given industry, because
`
`that support may evaporate if Congressional control changes hands.
`
`2. Control Contracts allow parties to hedge specific outcomes.
`Congressional Control Contracts offer the additional advantage of
`
`hedging against more granular outcomes that become more or less likely if
`
`control of Congress changes. For example, during the 2002 Congressional
`election season, the President had specifically called on Congress to
`
`“guarantee all senior citizens prescription drug coverage.” President’s Radio
`
`Address (May 18, 2002), https://perma.cc/RCB2-QBSX. After the Senate
`Majority flipped in 2003—giving a single party control of the Presidency and
`
`both chambers—Congress did just that when it passed the Medicare
`
`Prescription Drug, Improvement, and Modernization Act, Pub. L. No. 108-
`173, 117 Stat. 2066 (2003), creating billions in new spending. See Jennifer
`
`O’Sullivan, Cong. Rsch. Serv., Overview of the Medicare Prescription Drug,
`
`2003
`of
`and Modernization Act
`Improvement,
`2004),
`6,
`(Dec.
`https://perma.cc/QWZ7-RVXN. Viewing all this from 2002—before the
`
`Senate flipped—any number of businesses could have used Control
`
`Contracts to hedge the financial risks associated with that Act’s passage.
`C. Control Contracts can also help hedge risks that are
`independent of official Congressional action.
`Congressional control itself can also pose direct financial risks to
`
`businesses and individuals—even before considering what official action
`
`7
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 16 of 22
`
`Congress might take. Consider a startup that knows it will need to raise
`capital sometime after the next Congressional election. If the party that takes
`
`(or keeps) power seeks to aggressively regulate the startup’s business, then
`
`the startup’s cost of capital may increase. The cost goes up not because of
`anything Congress has done, but rather because capital markets view the
`
`mere change in control as a meaningful factor affecting the startup’s
`
`creditworthiness or viability. Control Contracts can help the startup manage
`that risk.
`II. Event markets for Control Contracts serve the public interest by
`offering an accurate and useful predictive tool.
`Event markets reveal collective wisdom. See, e.g., Michael J. de la Merced,
`Political Betting Markets See Vindication in Trump Victory, N.Y. Times (Nov. 6,
`
`2024), https://tinyurl.com/46hafuf7. The prices for Control Contracts reflect
`
`a wide array of informed opinions about which political party will control
`each house of Congress. So the price itself represents the market’s real-time
`
`prediction about what will happen in an election. By observing these
`
`markets, members of the general public can harness the wisdom of crowds
`to help make better decisions—even without ever buying or selling in the
`
`market themselves. That wisdom helps the public make strategic decisions
`
`about how to structure their affairs. For these reasons, too, Control Contracts
`are in the public interest.
`
`8
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 17 of 22
`
`A. Event markets give an up-to-the-minute prediction of political
`outcomes.
`Predictions are valuable only if accurate. Even though they do not offer
`
`predictive certainty, event markets do have several accuracy-enhancing
`
`features. First, event markets are accurate because of their inherent ability to
`adjust to new information in real time. As events unfold and new data
`
`becomes available, market participants swiftly incorporate this information
`
`into their hedging strategies. This continuous flow of information—and the
`immediate response of market actors—ensures that prices of event contracts
`
`are always reflective of the most current understanding and expectations
`
`regarding, e.g., Congressional control. The “real time” nature of event
`markets separates them from polling data, which can lag for days.
`
`Second, market participants have a financial stake in whether a
`
`particular event comes to pass and are therefore highly motivated to try to
`accurately forecast event outcomes. In contrast, polling results are based on
`
`the potentially uninformed opinions of individuals selected at random. The
`
`vested interest of event-market participants leads to more precise and
`reliable market pricing.
`
`Third, event markets are open to a wide array of buyers and sellers. Each
`
`participant brings their own unique preferences, objectives, and experiences
`to the table. These buyers and sellers can include hedgers seeking to mitigate
`
`risk, institutional investors who wish to diversify their portfolios, or even
`
`speculators looking to profit from future changes in contract prices. That
`
`9
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 18 of 22
`
`diversity ensures that the market prices reflect a broad spectrum of
`perspectives. The interaction between these participants—each employing
`
`their own specific strategies and insights—contributes to the depth,
`
`liquidity, and efficiency of the market for event contracts, which in turn
`lowers the cost of hedging. For many event contracts, including Control
`
`Contracts, this holistic perspective is unavailable anywhere else.
`
`Unlike polling data, Control Contracts do not suffer from sample bias,
`recency bias, survey bias, or any of the numerous other complicated pitfalls
`
`that weigh down the accuracy of political polling. They are real-time and
`
`open to informed individual and institutional participants, unlike polling,
`which uses retrospective snapshots in time of sampled individual voters.
`
`Indeed, professional statistician Nate Silver has recognized that “prediction
`
`markets are considerably more accurate than [even] peer reviewed
`scholarship.” @NateSilver538, X (Jan. 13, 2024), https://perma.cc/WD4X-
`
`YRGA. And multiple news outlets have touted prediction markets’ success
`
`in forecasting the outcome of the recent presidential election. E.g., Allison
`Morrow, How prediction markets saw something the polls and pundits didn’t,
`
`CNN Business (Nov. 8, 2024), https://perma.cc/L398-Y7LN; Kelly Cloonan,
`
`Betting markets nailed Trump’s decisive win — and it’s a good reminder they can
`be more
`accurate
`than polls, Business
`Insider
`(Nov. 9, 2024),
`
`https://perma.cc/4C85-97P6.
`
`10
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 19 of 22
`
`B. Predictions of political outcomes are useful for many
`purposes.
`Reliable predictions of Congressional control play a crucial role in the
`
`strategic planning and decisionmaking processes of businesses and
`
`individuals. Predictions are an essential tool for navigating the uncertain
`and volatile political landscape. This foresight allows businesses to stay
`
`ahead of the regulatory curve, ensuring they are not caught off-guard by
`
`political shifts that could impact their revenue. Even individuals and
`businesses that do not use event contracts can use the data that event
`
`markets provide.
`
`For individuals, accurate predictions of political outcomes can influence
`a wide range of personal financial decisions. Anticipated changes in
`
`government policy regarding taxes, 401ks, and healthcare can have direct
`
`implications for individual financial planning. By staying informed about
`potential political shifts, individuals can adjust their savings strategies and
`
`investment portfolios. Likewise, real estate investors and homeowners alike
`
`benefit from understanding how political outcomes might affect property
`values. Data from event markets allows individuals to make more informed
`
`decisions in all these areas.
`
`Control Contracts give the public better data about the likelihood of
`political outcomes. That is why Harvard Professor (and former economic
`
`advisor to President Obama) Jason Furman has argued that “a liquid, well-
`
`regulated prediction market offering an accurate probability estimate of who
`
`11
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 20 of 22
`
`is likely to control Congress would thus be highly valuable to price
`discovery.” Jason Furman, Comment Letter on KalshiEx Proposed Congressional
`
`Control Contracts Under CFTC Regulation 40.11, at 2-3 (Sept. 18, 2022),
`
`https://perma.cc/TD76-9HMU. Just so. Business owners must make
`decisions based on what the economy will look like in the future. Individuals
`
`must make career and retirement decisions based on how much money they
`
`will need in the future.
`Congress has a large degree of power to influence future financial
`
`outcomes. And the party that controls Congress has wide latitude to decide
`
`how that power will be used. Control Contracts are in the public interest
`because they help the public assess and plan for the actions Congress might
`
`take.
`
`*
`*
`*
`Despite all this, the Commission “found that Kalshi’s congressional
`
`control contracts were contrary to the public interest.” App. 104. That
`
`finding was arbitrary and capricious. See Kalshi Br. 2, 59 n.18. This Court
`“may affirm summary judgment on any ground supported by the record.”
`
`Harris v. U.S. Dep’t of Veterans Affs., 776 F.3d 907, 911 (D.C. Cir. 2015) (citing
`
`Jones v. Bernanke, 557 F.3d 670, 676 (D.C. Cir. 2009). Because the
`Commission’s “public interest” finding was arbitrary and capricious, and
`
`for the other reasons stated in Kalshi’s brief, this Court should affirm the
`
`district court’s order.
`
`
`
`
`12
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 21 of 22
`
`CONCLUSION
`
`The Court should affirm.
`
`
`
`
`
`Joshua P. Morrow
`LEHOTSKY KELLER COHN LLP
`408 W. 11th St., 5th Floor
`Austin, TX 78701
`
`
`
`
`
`
`
`
`
`
`Respectfully submitted.
`
`/s/ Scott A. Keller
`ScoW A. Keller
`LEHOTSKY KELLER COHN LLP
`200 MassachuseWs Ave. NW,
`Suite 700
`Washington, DC 20001
`(512) 693-8350
`scott@lkcfirm.com
`
`Counsel for Amicus Curiae
`Paradigm Operations LP
`
`
`13
`
`
`
`

`

`USCA Case #24-5205 Document #2086326 Filed: 11/22/2024 Page 22 of 22
`
`CERTIFICATE OF SERVICE
`On November 22, 2024, this brief was served via CM/ECF on all
`
`registered counsel and transmitted to the Clerk of the Court.
`
`
`
`
`
`/s/ Scott A. Keller
`Scott A. Keller
`
`CERTIFICATES OF COMPLIANCE
`I certify that this brief complies with: (1) the type-volume limitations of
`Rule 29(a)(5) and D.C. Circuit Rule 32(e)(3) because it contains 2,705 words,
`
`excluding the parts of the brief exempted by Rule 32(f) and D.C. Circuit Rule
`
`32(e)(1); and (2) the typeface requirements of Rule 32(a)(5) and the type style
`requirements of Rule 32(a)(6) because it has been prepared in a
`
`proportionally spaced typeface (14-point Palatino Linotype) using Microsoft
`
`Word (the same program used to calculate the word count). See Fed. R. App.
`P. 29(a)(4)(G); Fed. R. App. P. 32(g)(1).
`
`
`
`
`
`
`
`
`/s/ Scott A. Keller
`Scott A. Keller
`
`14
`
`
`
`