USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 1 of 32
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`[ORAL ARGUMENT NOT YET SCHEDULED]
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`NO. 24-5205
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`In the United States Court of Appeals
`For the District of Columbia
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`KALSHIEX LLC,
`Plaintiff-Appellee,
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`v.
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`COMMODITY FUTURES TRADING COMMISSION,
`Defendant-Appellant,
`
`
`ON APPEAL FROM THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`BRIEF OF AMICUS CURIAE ARISTOTLE
`INTERNATIONAL, INC., IN SUPPORT OF APPELLEE
`
`Michael J. Edney
`Hunton Andrews Kurth LLP
`
`2200 Pennsylvania Avenue, NW
`Washington, DC 20037
`(202) 778-2204
`medney@huntonak.com
`
`
`
`
`
`Ethan Rosen
`DC Bar No. 1736636
`Aristotle International, Inc.
`205 Pennsylvania Avenue, SE
`Washington, DC 20003
`Ethan.rosen@aristotle.com
`
`
`Counsel for Amicus Curiae Aristotle International, Inc.
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 2 of 32
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`CORPORATE DISCLOSURE STATEMENT
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`Pursuant to Rules 26.1 and 29 of the Federal Rules of Appellate Procedure,
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`and D.C. Circuit Rules 26.1 and 29(b), undersigned counsel certifies:
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`Amicus Curiae Aristotle International has no parent company, and no publicly
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`held company has a 10% or greater ownership interest in it.
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 3 of 32
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`STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS
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`Pursuant to Federal Rule of Appellate Procedure 29(a)(4)(E) and D.C. Circuit
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`Rule 29(4)(E), Amicus certifies that no counsel for any party authored the brief in
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`whole or in part, and no entity or person other than the Amicus contributed money
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`that was intended to fund the preparation or submission of this brief.
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 4 of 32
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`REPRESENTATION OF CONSENT FROM ALL PARTIES AND
`CERTIFICATE STATING WHY A SEPARATE BRIEF IS NECESSARY
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`Pursuant to Federal Rule of Appellate Procedure 29(a)(2) and D.C. Circuit
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`Rule 29(b), undersigned counsel for Aristotle International, Inc. (“Aristotle”)
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`certifies that all parties have consented to the filing of this brief. Pursuant to D.C.
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`Circuit Rule 29(d), undersigned counsel for Aristotle further certifies that this
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`separate brief is necessary. Aristotle is aware of no other potential amicus curiae
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`that has extensive experience operating markets of the type at issue in this litigation.
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`iv
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 5 of 32
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`TABLE OF CONTENTS
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`CORPORATE DISCLOSURE STATEMENT .............................................................................. ii
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`STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS .............................. iii
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`REPRESENTATION OF CONSENT FROM ALL PARTIES AND CERTIFICATE
`STATING WHY A SEPARATE BRIEF IS NECESSARY.............................................. iv
`
`TABLE OF CONTENTS ................................................................................................................ v
`
`TABLE OF AUTHORITIES ......................................................................................................... vi
`
`GLOSSARY ................................................................................................................................... x
`
`INTEREST OF AMICUS CURIAE ............................................................................................... 1
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`INTRODUCTION .......................................................................................................................... 2
`
`ARGUMENT .................................................................................................................................. 3
`
`I.
`
`ELECTION CONTRACTS ARE NOT GAMING................................................. 3
`
`A.
`
`B.
`
`C.
`
`The CFTC’s Proposed Definition of Gaming is Unworkable and
`Leads to Arbitrary Outcomes. ..................................................................... 4
`
`The CFTC’s Definition of Gaming is Unsupported and
`Contradicted by the Legislative History. .................................................... 7
`
`Elections are distinct from Games in that they have direct and far-
`reaching economic effects........................................................................... 9
`
`II.
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`The PROPOSED CONTRACTS DO NOT INVOLVE ACTIVITY THAT
`VIOLATES STATE OR FEDERAL LAWS. ....................................................... 15
`
`CONCLUSION ............................................................................................................................. 19
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`CERTIFICATE OF COMPLIANCE ............................................................................................ 20
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`CERTIFICATE OF SERVICE ..................................................................................................... 21
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`v
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 6 of 32
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`TABLE OF AUTHORITIES
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` Page(s)
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`Cases
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`Clarke v. Commodity Futures Trading Comm'n,
`74 F.4th 627 (5th Cir. 2023) ................................................................................. 3
`
`Dep't of Homeland Sec. v. Regents of the Univ. of Cal.,
`140 S. Ct. 1891 (2020) .......................................................................................... 5
`
`Judulang v. Holder,
`132 S.Ct. 476 (2011) ............................................................................................. 7
`
`Kingdomware Techs., Inc. v. United States,
`136 S. Ct. 1969 (2016) .......................................................................................... 3
`
`National Woodwork Mfrs. Ass'n v. NLRB,
`386 U.S. 612 (1967) .............................................................................................. 8
`
`
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`Statutes
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`7 U.S.C. § 7a-2(c)(5)(C) ............................................................................................ 2
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`Ala. Code § 13A-12-20 ............................................................................................ 16
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`S.D. Codified Laws § 22-25A-1 .............................................................................. 16
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`
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`Constitution
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`N.J. Const. art. IV, § 7 ............................................................................................. 17
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`N.Y. Const. art. I, § 9... ............................................................................................ 17
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`Neb. Const. art. III, § 24 .......................................................................................... 17
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`vi
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 7 of 32
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`Legislative Materials
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`17 C.F.R. § 40.11(c) ................................................................................................... 3
`
`156 Cong. Rec. S5906-07 (daily ed. July 15, 2010) (statements of Sen.
`Dianne Feinstein & Sen Blanche Lincoln). .......................................................... 8
`
`89 Fed. Reg. 112 (proposed June 10, 2024) .............................................................. 4
`
`Comment of Senator Blanche Lincoln on Proposed Rule Regarding
`Event Contracts (Aug. 8, 2024),
`https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=
`74357. .................................................................................................................... 8
`
`Commodity Futures Trading Commission, “Cantor Futures Exchange,
`L.P: Rule 40.2 New Contract Submission—Atlantic Named Storm
`Landfall Binary Option Contract Submission #2016-5,”, Jun. 13,
`2016, available at
`www.cftc.gov/sites/default/files/filings/ptc/16/06/ptc061416cantordc
`m001.pdf ............................................................................................................. 16
`
`Congressional Budget Office, “Estimated Budgetary Effects of HR
`1319, American Rescue Plan Act of 2021 as Passed by the Senate on
`March 6, 2021,”, Mar. 2021, available at
`www.cbo.gov/system/files/2021-
`03/Estimated_Budgetary_Effects_of_HR_1319_as_passed_0.pdf. ................... 12
`
`Congressional Budget Office, “Estimated Budgetary Effects of H.R.
`5376, the Inflation Reduction Act of 2022, as Amended in the Nature
`of a Substitute (ERN22335) and Posted on the Website of the Senate
`Majority Leader on July 27, 2022,” Aug. 5, 2022, available at
`www.cbo.gov/system/files/2022-08/hr5376_IR_Act_8-3-22.pdf. ..................... 12
`
`
`
`Other Authorities
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`ForecastEx, Will Atmospheric Carbon Dioxide be greater than
`426.1ppm in 2024?, (Nov. 22, 2024, 9:04 PM), available at
`https://forecastex.com/markets/ACD/ACD_1224_426.1 ................................... 16
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`vii
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 8 of 32
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`ForecastEx, Will the year-over-year change in the Singapore Consumer
`Price Index exceed 3% in October 2024?, (Nov. 22, 2024, 9:04 PM),
`available at https://forecastex.com/markets/ACD/ACD_1224_426.1 ............... 16
`
`Kalshi, GPT beaten by another LLM this year?, (Nov. 22, 2024, 8:55
`PM), available at https://kalshi.com/markets/kxtopllm/gpt-no-longer-
`top-ranked-llm....................................................................................................... 6
`
`Kalshi, Grammy for Album of the Year?, (Nov. 22, 2024, 8:55 PM),
`available at https://kalshi.com/markets/kxgramaoty/grammy-for-
`album-of-the-year ................................................................................................. 6
`
`Kalshi, Number of Hurricanes in 2023?, (Nov. 22, 2024, 8:55 PM),
`available at kalshi.com/markets/hurctot/number-of-hurricanes ......................... 16
`
`Kalshi, Ozempic and Wegovy prescriptions increase this quarter?, (Nov.
`22, 2024, 8:56 PM), available at
`https://kalshi.com/markets/weightdrugsq/ozempic-and-wegovy-
`prescriptions-increase#weightdrugsq-4-24 ......................................................... 16
`
`Kalshi, SpaceX Starship 6th launch?, (Nov. 22, 2024, 8:56
`PM),available at https://kalshi.com/markets/kxspacexstarship/spacex-
`starship-launch .................................................................................................... 16
`
`Kalshi, Top song on Spotify USA Chart today?, (Nov. 22, 2024, 8:57
`PM), available at https://kalshi.com/markets/kxspotifyd/daily-usa-
`spotify-chart .......................................................................................................... 6
`
`Paul Kiernan, Election Betting Markets Favor Harris as Democratic
`Nominee, Wall Street Journal (July 3, 2024),
`https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-
`nasdaq-live-07-03-2024/card/election-betting-markets-favor-harris-
`as-democratic-nominee-Q0WuHt30kx0IFgxAahjX .......................................... 10
`
`PredictIt, Will Biden policy to raise minimum wage to $15 per hour in
`2021 succeed?, (Nov. 22, 2024, 8:57 PM), available at
`https://www.predictit.org/markets/detail/7075/Will-Biden-policy-to-
`raise-minimum-wage-to-$15-per-hour-in-2021-succeed ................................... 13
`
`
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 9 of 32
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`David Lague, U.S.-China Tech Battle Heats Up Over Drones, Reuters
`(Sept. 8, 2023), https://www.reuters.com/investigates/special-
`report/us-china-tech-drones/. .............................................................................. 10
`
`Harri Leigh, Crypto industry pours tens of millions of dollars into Ohio
`Senate race to defeat Sherrod Brown, Spectrum News (Oct. 17,
`2024),
`https://spectrumnews1.com/oh/columbus/news/2024/10/17/crypto-
`brown-moreno-senate. ........................................................................................ 11
`
`Nicholas Megaw, Madison Darbyshire & James Fontanella-Khan, How
`the investment world is trying to navigate geopolitics, Financial
`Times (July 5, 2024), https://www.ft.com/content/23ce295d-bf65-
`47fd-bebd-808b5a7bcab5 ................................................................................... 13
`
`Paul Chuck Mikolajczak, S&P 500 futures soar to record high after
`Trump claims victory, Reuters (Nov. 6, 2024),
`https://www.reuters.com/markets/us/sp-500-futures-soar-record-high-
`after-trump-claims-victory-2024-11-06/............................................................. 11
`
`Oliver Roeder & Eva Xiao, What Are Kamala Harris’s Chances Against
`Donald Trump?, Financial Times (July 23, 2024),
`https://www.ft.com/content/77b32462-3d56-43f9-bb4d-
`44f8c58edc8a. ..................................................................................................... 10
`
`MacKenzie Sigalos, Coinbase CEO Brian Armstrong $2 Billion Richer
`on Election Stock Pop, CNBC (Nov. 6, 2024),
`https://www.cnbc.com/2024/11/06/coinbase-ceo-brian-armstrong-2-
`billion-richer-on-election-stock-pop.html .......................................................... 11
`
`Brian Sozzi, Don’t Expect a $15 Federal Minimum Wage: Goldman
`Sachs, Yahoo! Finance, (Feb. 8, 2021),
`finance.yahoo.com/news/dont-expect-a-15-federal-minimum-wage-
`goldman-sachs-130431033.html (demonstrating the unavailability of
`the reconciliation process for a minimum wage increase). .......................... 13, 14
`
`Lu Wang, The Trump Trade Is Back: What It Means for Investors,
`Bloomberg (July 17, 2024),
`https://www.bloomberg.com/news/articles/2024-07-17/the-trump-
`trade-is-back-what-it-means-for-investors. ........................................................ 10
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`ix
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 10 of 32
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`Alan Wynne, Is the Trump Trade a Good Deal?, JP Morgan Private
`Bank, (Jul. 26, 2024)
`https://privatebank.jpmorgan.com/nam/en/insights/markets-and-
`investing/tmt/is-the-trump-trade-a-good-deal. ................................................... 10
`
`
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`x
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 11 of 32
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`APA
`
`App.
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`CEA
`
`GLOSSARY
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`Administrative Procedure Act, 5 U.S.C. § 551, et seq.
`
`Joint Appendix
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`Commodity Exchange Act, 7 U.S.C. § 1, et seq.
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`CFTC or Commission U.S. Commodity Futures Trading Commission
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`DCM
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`Designated Contract Market
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`xi
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 12 of 32
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`INTEREST OF AMICUS CURIAE
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`Aristotle International, Inc. (“Aristotle”), through its PredictIt, Inc. subsidiary,
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`acts as a clearing house and service provider to Victoria University of Wellington’s
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`PredictIt market, which has offered contracts comparable to those at issue in this
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`matter.
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`PredictIt began operating pursuant to a No Action Letter issued to Victoria
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`University by the Commodity Futures Trading Commission (“CFTC” or
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`“Commission”) Division of Market Oversight in 2014. Within the bounds of the
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`2014 No Action Letter, PredictIt has offered Congressional Control Contracts for
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`the 2016, 2018, 2020, and 2022 election cycles, and has offered Presidential
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`Contracts in 2016, 2020, and 2024. In servicing these markets, Aristotle has
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`generated valuable experience and data relevant to issues in this matter.
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`1
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 13 of 32
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`INTRODUCTION
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`One year into this litigation, the Commodity Futures Trading Commission
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`(“CFTC’) is still struggling to explain why it prohibited Kalshi from listing contracts
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`that resolve based upon the outcomes of elections. The CFTC jumps through hoops
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`to claim that the proposed contracts involve gaming and are unlawful under state
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`law. And the CFTC cannot explain why it has not applied its own rationales to the
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`many other types of event contracts listed on CFTC-regulated exchanges.
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`Before the CFTC prohibits a designated contract market from listing an event
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`contract, the CFTC is required to adhere to a two-step process. 7 U.S.C. § 7a-
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`2(c)(5)(C). First, it must determine that the contracts involve: (1) activity that is
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`unlawful under any Federal or State law; (2) terrorism; (3) assassination; (4) war;
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`(5) gaming; or (6) other similar activity determined by the Commission, by rule or
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`regulation, to be contrary to the public interest. Id. Second, it must determine that
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`the contracts are contrary to the public interest. Id.
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`The CFTC found that Kalshi’s proposed contracts relate to both gaming and
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`activity that is unlawful under State law, and that the Proposed Contracts are contrary
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`to the public interest. The District Court vacated the Order because the Proposed
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`Contracts involve neither gaming nor activity that is unlawful under state law. App.
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`93-119.
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`2
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 14 of 32
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`The District Court was correct. Elections are not games, and the CFTC has
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`yet to, over a year into this litigation, articulate a definition of “gaming” that includes
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`elections but does not include broad swaths of the other topics found within CFTC-
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`regulated event contracts. Elections are also not “unlawful under . . . State law,”
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`and the CFTC has not articulated a construction of this provision that would not
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`apply to literally every event contract on a DCM.
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` The CFTC has plainly demonstrated that it does not like political event
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`contracts. The agency’s unlawful attempt to shut down the PredictIt market for
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`political event contracts (see Clarke v. Commodity Futures Trading Comm'n, 74
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`F.4th 627, 641-44 (5th Cir. 2023)), among other actions, made that clear. But the
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`law is also clear; the Commission must demonstrate that a proposed contract fits into
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`one of the articulated categories before it proceeds to review and then block its
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`listing.
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`I. ELECTION CONTRACTS ARE NOT GAMING
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`ARGUMENT
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`As the District Court correctly held, “gaming” requires a game. App. 106-11.
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`The Supreme Court has made it clear that, “[i]n statutory construction, we begin with
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`the language of the statute. If the statutory language is unambiguous and “the
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`statutory scheme is coherent and consistent” — as is the case here — “[t]he inquiry
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`ceases.” Kingdomware Techs., Inc. v. United States, 579 U.S. 162 (2016).
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`3
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 15 of 32
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`The CFTC would like this Court to take a different approach. The CFTC’s
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`definition of gaming starts by defining gaming as being synonymous with gambling,
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`and then defining gambling to mean the staking something of value upon the
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`outcome of “a game, contest, or contingent event.” App. 134-35. The CFTC’s
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`approach is unworkable and does not reflect its years of experience in regulating
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`event contracts. Its subsequent explanations for its rationales misuse and miscite the
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`legislative history of the underlying statute and ignore the key distinctions between
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`games and elections.
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`A. The CFTC’s Proposed Definition of Gaming is Unworkable and Has
`Already Lead to Arbitrary Outcomes.
`
`The CFTC, in the Kalshi Order, proposed gaming to mean gambling, and then
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`proposed that gambling was “staking something of value upon the outcome of a
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`game, contest or contingent event.” App. 134-35. Because elections are sometimes
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`described as a “contest,” the CFTC found that the contracts relate to gaming. Id.
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`This definition, however, would apply to most, if not all, event contracts that
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`are currently traded. As the District Court explained, under “the CFTC’s
`
`construction, all event contracts would be subject to review under the special rule
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`because they all involve purchasing (and thus risking money on) some contingent
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`event with the hope of receiving a payoff.” App. 108. The CFTC’s definition would
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`4
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 16 of 32
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`capture a broad range of markets, such as contracts that relate to weather1 or the
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`future value of the Singapore Consumer Price Index.2 The CFTC has never
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`contended that these markets are subject to public interest review. As the District
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`Court correctly explained, “any definition of ‘gaming’ that could be read to subject
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`all event contracts to the special rule just cannot be right.” App. 108-09.
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`The CFTC now seeks to retreat to a narrower definition of gaming. In this
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`new definition, gaming is still gambling, but gambling merely involves the “staking
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`something of value on a contest of others.” CFTC Br. at 44. But “[i]t is a
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`foundational principle of administrative law that judicial review of agency action is
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`limited to the grounds that the agency invoked when it took the action.” Dep't of
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`Homeland Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1907–08
`
`(2020) (internal citations omitted). The agency can only offer “a fuller explanation
`
`of the agency's reasoning at the time of the agency action." Id. (internal citation
`
`omitted).
`
`At the time of the agency action, the Commission proposed the more
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`expansive definition but neglected to apply it to anything other than its disfavored
`
`
`1 “Weather Products” CME Group, available at
`https://www.cmegroup.com/markets/weather.html.
`2 Forecastex, Will the year-over-year change in the Singapore Consumer Price
`Index exceed 3% in October 2024?, (Nov. 22, 2024, 9:04 PM), available at
`https://forecastex.com/markets/SGCPI/SGCPI_1024_3.0
`
`
`5
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 17 of 32
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`category, political event contracts. The same is true of its contest-specific definition.
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`Indeed, Designated Contract Markets, both at the time that the Order was written
`
`and prior to the District Court decision, offered contracts on everything from the
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`Grammy Awards3, the top songs on Spotify4, to advances in artificial intelligence5.
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`The outcomes of the Grammy Awards and the Spotify charts involve contests
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`because artists compete with each other on both the quality of their music and the
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`quantity of their music streams. Advances in artificial intelligence involve and are
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`often described as contests because corporations and nation states compete to
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`produce technology and products.6
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`The CFTC disclaims any need for consistency in treatment of contracts
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`because the Order is an ad hoc determination that does not govern “future
`
`applications of the Special Rule presenting different facts[.]” CFTC Br. at 43-46.
`
`The CFTC then admits that it dropped the “future contingent event” definition in a
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`proposed rulemaking precisely because it is overly broad, and acknowledges that it
`
`may also drop the “contest of others” prong in future adjudications if the usage of
`
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`3 Kalshi, Grammy for Album of the Year?, (Nov. 22, 2024, 8:55 PM), available at
`https://kalshi.com/markets/kxgramaoty/grammy-for-album-of-the-year.
`4 Top song on Spotify USA Chart today?, (Nov. 22, 2024, 8:57 PM),
`available at https://kalshi.com/markets/kxspotifyd/daily-usa-spotify-chart.
`5 Kalshi, GPT beaten by another LLM this year?, (Nov. 22, 2024, 8:55 PM),
`available at https://kalshi.com/markets/kxtopllm/gpt-no-longer-top-ranked-llm
`6 See, e.g., David Lague, U.S.-China Tech Battle Heats Up Over Drones,
`Reuters (Sept. 8, 2023), https://www.reuters.com/investigates/special-report/us-
`china-tech-drones/.
`
`6
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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 18 of 32
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`the prong does not help it arrive at its desired outcome. Id at 45-46. What all of this
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`shows, however, is that the agency has not advanced a coherent interpretation of the
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`statute and that the avowed basis of its action is contrary to law.
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`The CFTC is proposing that it subject virtually all event contracts to the exact
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`type of regulatory “game of chance” that the “APA's ‘arbitrary and capricious’
`
`standard is designed to thwart. Judulang v. Holder, 565 U.S. 42 (2011) (internal
`
`citations omitted).
`
`The District Court got it right when it determined that the CFTC’s Order is
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`plainly unworkable because, through all of its attempts to define election contracts
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`as gaming, it has failed to provide a definition that would not radically change the
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`legal environment for event contracts. This failure alone is evidence that the
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`Proposed Contracts simply do not involve gaming within this statutory context.
`
`B. The CFTC’s Definition of Gaming
`Contradicted by the Legislative History.
`
`is Unsupported and
`
`is
`
`The CFTC’s reliance on a Senate floor colloquy between Senators Blanche
`
`Lincoln and Diane Feinstein does not advance its argument. According to the
`
`Commission, the Senators suggested that “gaming” can refer to the act of trading
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`rather than to the nature of the underlying activity that the event contract concerns.
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`CFTC Br. 42-43; App. 139 n.29, 140 nn.30-31.
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`First, that colloquy did not occur on the floor of the Senate and thus is not the
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`type of immediately pre-enactment floor statement that some courts have looked as
`
`7
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`

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`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 19 of 32
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`persuasive legislative history.7 Instead, the colloquy was submitted to the
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`Congressional Record and printed only after passage of the legislation.
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`Nat'l Woodwork Mfrs. Ass'n v. N. L. R. B., 386 U.S. 612, 639 n.34 (1967).
`
`Second, the colloquy at most concerns keeping “games” off of futures
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`markets, by having special review of contracts that are designed to be backdoors into
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`bets on the outcomes of “sporting events such as the Super Bowl, the Kentucky
`
`Derby, and Masters Golf Tournament.”8
`
`The CFTC’s view has been further rejected by Senator Lincoln herself, who
`
`clarified in comments submitted to the agency that ““gaming” referred to “playing a
`
`game,” and “[e]lections are not games.”9 “The law was meant to capture recreational
`
`gambling on sporting events and casino-type activities, not the Nobel Prize in
`
`Physics or the outcome of major elections. These events are nothing like the Super
`
`Bowl, the Kentucky Derby, or the Masters Tournament.” Id.
`
`
`7 Compare the C-SPAN archive for July 15, 2010 https://www.c-
`span.org/video/?294558-1/senate-session, reviewed May 16, 2024, showing no
`appearances by either Senator Feinstein or Senator Lincoln on the Senate floor
`during debate on passage of the Dodd-Frank legislation to Congressional Record
`for the same date at S5906.
`8 156 Cong. Rec. S5906-07 (daily ed. July 15, 2010) (statements of Sen.
`Dianne Feinstein & Sen Blanche Lincoln).
`9 Comment of Senator Blanche Lincoln on Proposed Rule Regarding Event
`Contracts (Aug. 8, 2024),
`https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=74357
`
`8
`
`

`

`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 20 of 32
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`
`In its brief, the CFTC bizarrely contends that that “football and golf are
`
`‘games,’ not ‘gaming[,]’” and that “involve” in this context should be read to refer
`
`to the act of trading the football contracts, rather than to the fact that the contracts
`
`involve football. CFTC Br. at 46.
`
` Senator Lincoln’s
`
`clarification demonstrates
`
`that
`
`the CFTC’s
`
`counterintuitive reading of her words is incorrect. The law was written to prohibit
`
`contracts that relate to games, and gaming requires a game. Golf is a game, horse
`
`racing is a game, and football is game. Elections are not games.
`
`C. Elections are Distinct from Games Because Elections Have Direct and
`Far-reaching Economic Effects.
`
`The CFTC claims that contracts on elections relate to “gaming” because
`
`elections do not have direct economic consequences. According to the CFTC,
`
`“futures contracts traditionally have served hedging and risk management
`
`functions… the economic impacts of the outcome of contests for Congressional
`
`control are too diffuse and unpredictable to service the hedging and risk management
`
`functions that futures contracts have traditionally been intended to serve.” App. 136
`
`n.25.
`
`The financial markets themselves say otherwise. PredictIt and Kalshi
`
`elections probabilities, for example, already appear on the Bloomberg Terminal,
`
`where investors can see current probabilities of election winners. PredictIt odds can
`
`9
`
`

`

`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 21 of 32
`
`
`also be found on Thompson Reuters,10 and the Financial Times,11 among other
`
`services. These data are covered on financial platforms because elections influence
`
`the disposition of trillions of dollars in economic activity.
`
`The recent 2024 election cycle in the United States further demonstrates this
`
`point. Even before the party conventions took place, Candidate Trump’s polling
`
`lead and stated policy preferences lead to a “Trump Trade.”12 JP Morgan directly
`
`tied the popularity of this trade to Candidate Trump’s PredictIt odds.13 Later in the
`
`election cycle, THE NEW YORK TIMES, THE WALL STREET JOURNAl, THE
`
`ECONOMIST, and THE FINANCIAL TIMES repeatedly cited PredictIt odds.14
`
`As markets later processed the news that Republicans had won the White
`
`House and Senate, and were favored to win the House of Representatives, the broad-
`
`
`10 Trump Media Shares Tumble to New Lows After Insider Selling Curbs
`Expire, Reuters (Sept. 23, 2024), https://www.reuters.com/technology/trump-
`media-shares-tumble-new-lows-after-insider-selling-curbs-expire-2024-09-23/.
`11 Oliver Roeder & Eva Xiao, What Are Kamala Harris’s Chances Against
`Donald Trump?, Financial Times (July 23, 2024),
`https://www.ft.com/content/77b32462-3d56-43f9-bb4d-44f8c58edc8a.
`12 Lu Wang, The Trump Trade Is Back: What It Means for Investors,
`Bloomberg (July 17, 2024), https://www.bloomberg.com/news/articles/2024-07-
`17/the-trump-trade-is-back-what-it-means-for-investors.
`13 Alan Wynne, Is the Trump Trade a Good Deal?, JP Morgan Private Bank,
`(Jul. 26, 2024) https://privatebank.jpmorgan.com/nam/en/insights/markets-and-
`investing/tmt/is-the-trump-trade-a-good-deal.
`14 See, e.g., Paul Kiernan, Election Betting Markets Favor Harris as
`Democratic Nominee, Wall Street Journal (July 3, 2024),
`https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-07-
`03-2024/card/election-betting-markets-favor-harris-as-democratic-nominee-
`Q0WuHt30kx0IFgxAahjX.
`
`10
`
`

`

`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 22 of 32
`
`
`market S&P500 index (which can be tracked via SPY), rose by 2.5% on November
`
`6. Financial institutions (trackable via SPXBK), which expect deregulation under
`
`the incoming Republican trifecta, rose by 10%. Alphabet (GOOGL), which has been
`
`facing the threat of a forced breakup under the Biden Administration, rose by 4%.
`
`Treasury yields rose in anticipation of the imposition of the tariffs promised by
`
`President-Elect Trump on the campaign trail.15 By contrast, iShares Global Clean
`
`Energy ETF (ICLN), which tracks a basket of renewable energy stocks, dropped by
`
`7% on the same day, defying the broader market trend as investors anticipated
`
`rollbacks of the clean energy subsidies passed under a previous Democratic
`
`Administration and Congress. The cryptocurrency industry spent tens of millions of
`
`dollars trying to unseat industry-antagonist Senator Sherrod Brown, 16 and Coinbase
`
`stock (COIN) subsequently rose by 30% in one day in the wake of his defeat. The
`
`CEO of Coinbase indicated this surge was specifically related to the Ohio Senate
`
`Election.17
`
`
`15 Chuck Mikolajczak, S&P 500 futures soar to record high after Trump
`claims victory, Reuters (Nov. 6, 2024), https://www.reuters.com/markets/us/sp-
`500-futures-soar-record-high-after-trump-claims-victory-2024-11-06/.
`16 Harri Leigh, Crypto industry pours tens of millions of dollars into Ohio
`Senate race to defeat Sherrod Brown, Spectrum News (Oct. 17, 2024),
`https://spectrumnews1.com/oh/columbus/news/2024/10/17/crypto-brown-moreno-
`senate.
`17 MacKenzie Sigalos, Coinbase CEO Brian Armstrong $2 Billion Richer on
`Election Stock Pop, CNBC (Nov. 6, 2024),
`https://www.cnbc.com/2024/11/06/coinbase-ceo-brian-armstrong-2-billion-richer-
`on-election-stock-pop.html
`
`11
`
`

`

`USCA Case #24-5205 Document #2086475 Filed: 11/22/2024 Page 23 of 32
`
`
`These are not flukes. Markets have repeatedly demonstrated that they are
`
`capable of interpreting election results and making predictions of how they will
`
`affect market economies. The same clean energy index (ICLN) rallied after
`
`Democrats won control of the Senate after the 2020 elections: It increased by 17%
`
`between December 31, 2020, and January