USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 1 of 34
`ORAL ARGUMENT HAS NOT BEEN SCHEDULED
`
`No. 24-5205
`
`IN THE
`United States Court of Appeals
`for the District of Columbia Circuit
`
`
`KALSHIEX LLC,
`
`Plaintiff-Appellee,
`
`– v. –
`
`COMMODITY FUTURES TRADING COMMISSION,
`
`Defendant-Appellant.
`
`On Appeal From a Final Judgment of the United States
`District Court for the District of Columbia (Cobb, J.)
`
`BRIEF OF FORECASTEX, LLC
`AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLEE AND
`AFFIRMANCE
`
`
`
`
`
`Daniel J. Davis
`Neal S. Mehrotra (admission pending)
`KATTEN MUCHIN ROSENMAN LLP
`1919 Pennsylvania Avenue NW – Suite
`800
`Washington, DC 20006
`Tel.: 202-625-3500
`Fax: 202-298-7570
`daniel.davis@katten.com
`neal.mehrotra@katten.com
`
` Counsel for Amicus Curiae
`
`
`
`

`

`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 2 of 34
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`
`CORPORATE DISCLOSURE STATEMENT AND CONSENT TO FILE
`
`Pursuant to Federal Rule of Appellate Procedure 26.1 and D.C. Circuit
`
`Rule 26.1, amicus curiae states that ForecastEx, LLC is a wholly owned subsidiary of
`
`Interactive Brokers Group, Inc and that no publicly traded company owns 10% or more
`
`of the stock of Interactive Brokers Group, Inc.
`
`Pursuant to Federal Rule of Appellate Procedure 29(a)(2) and D.C. Circuit
`
`Rule 29(b), amicus curiae states that all parties to this proceeding have consented to the
`
`filing of this brief.
`
`
`
`i
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`

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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 3 of 34
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`
`TABLE OF CONTENTS
`
`CORPORATE DISCLOSURE STATEMENT AND CONSENT TO FILE ............. i
`
`TABLE OF AUTHORITIES ............................................................................................. iii
`
`GLOSSARY .......................................................................................................................... vii
`
`STATEMENT OF INTEREST OF AMICUS CURIAE ............................................... 1
`
`ARGUMENT ......................................................................................................................... 3
`
`I.
`
`THIS COURT SHOULD AVOID INTERPRETING POLITICAL EVENT
`CONTRACTS TO BE EITHER “GAMING” OR “CONTRARY TO FEDERAL OR
`STATE LAW” BECAUSE HOLDING OTHERWISE WOULD RAISE SERIOUS
`CONSTITUTIONAL QUESTIONS UNDER THE FIRST AMENDMENT. ................. 5
`
`A. Election-based contracts reflect archetypical speech on matters of
`public concern within the First Amendment because of the interests
`of both the speaker (each market participant and ForecastEx) and the
`audience (the public) ....................................................................................... 6
`
`1. The CFTC’s content-based restriction fails strict scrutiny ............. 9
`
`II.
`
`FORECASTEX’S EXPERIENCE WITH POLITICAL EVENT CONTRACTS REFUTES
`THE CFTC’S THINLY SUPPORTED PUBLIC INTEREST ANALYSIS ......................... 11
`
`A.
`
`The CEA and CFTC rules have significant and meaningful
`requirements to protect market and product integrity .............................. 12
`
`1.
`
`2.
`
`Any Attempted Manipulation Would Be Ephemeral and Self-
`Correcting. …………………………………………………….17
`
`The CFTC’s concerns about spread of disinformation did not pan
`out…………………………………………………………......20
`
`B. The CFTC provides no support to substantiate its concern that allowing
`listing of election-based contracts would turn it into an election cop.
`…………..........................................................................................................21
`
`CONCLUSION ................................................................................................................... 24
`
`CERTIFICATE OF COMPLIANCE .............................................................................. 25
`
`CERTIFICATE OF SERVICE ......................................................................................... 26
`
`
`
`ii
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 4 of 34
`
`
`TABLE OF AUTHORITIES
`
`Cases
`
`Brooklyn Branch of NAACP v Kosinski,
`657 F. Supp. 3d 504 (S.D.N.Y 2023) .............................................................................. 7
`
`Comcast Corp. v. F.C.C.,
`579 F.3d 1 (D.C. Cir. 2009) ........................................................................................... 23
`
`Connick v. Myers,
`461 U.S. 138 (1983) .......................................................................................................... 6
`
`Citizens United v. Federal Election Comm'n,
`558 U.S. 310 (2010) .................................................................................................... 9,10
`
`Daily Herald Co. v. Munro,
`838 F.2d 380 (9th Cir. 1988) .................................................................................. 7, 9,10
`
`First National Bank of Boston. v. Bellotti,
`435 U.S. 765 (1978) .......................................................................................................... 9
`
`Garrison v. Louisiana,
`379 U.S. 64 (1964) ............................................................................................................ 6
`
`Hurley v. Irish-Am. Gay, Lesbian & Bisexual Grp.,
`515 U.S. 557 (1995) ...................................................................................................... 7, 8
`
`Jian Zhang v. Baidu.com Inc.,
`10 F. Supp. 3d 433 (S.D.N.Y. 2014) ............................................................................... 8
`
`Kleindienst v. Mandel,
`408 U.S. 753 (1972) .......................................................................................................... 9
`
`McIntyre v. Ohio Elections Comm’,
`514 U.S. 334 (1995) .......................................................................................................... 6
`
`Mills v. Alabama,
`384 U.S. 214 (1966) .......................................................................................................... 6
`
`Nat’l Tel. Co-op. Ass’n v. FCC,
`563 F.3d 536 (D.C. Cir. 2009) ....................................................................................... 19
`
`iii
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`

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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 5 of 34
`
`
`New York Times Co. v. Sullivan,
`376 U.S. 254 (1964) .......................................................................................................... 6
`
`Pittsburgh Press Co. v. Pittsburgh Comm'n on Hum. Rels,
`413 U.S. 376 (1973) .......................................................................................................... 6
`
`Public Citizen v. U.S. Department of Justice,
`491 U.S. 440 (1973) .......................................................................................................... 5
`
`Realtors v. HHS,
`141 S. Ct. 2485 (2021)... ................................................................................................. 22
`
`Reed v. Town of Gilbert,
`
`576 U.S. 155 (2015) .......................................................................................................... 9
`
`Sorenson Communications, Inc. v. FCC,
`755 F.3d 702 (D.C. Cir. 2014) ................................................................................. 15, 21
`
`Sorrell v. IMS Health, Inc.,
`564 U.S. 552 (2011) .......................................................................................................... 7
`
`United States v. Alvarez,
`567 U.S. 709 (2012) ........................................................................................................ 11
`
`United States v. Jin Fuey Moy,
`241 U.S. 394 (1916) .......................................................................................................... 5
`
`United States v. Rumely.,
`345 U.S. 41 (1953) ............................................................................................................ 5
`
`Vanasco v. Schwartz,
`401 F. Supp. 87 (S.D.N.Y 1975) ................................................................................... 10
`
`Virginia Petroleum Jobbers v. FPC,
`259 F.2d 921 (D.C. Cir. 1958) ...................................................................................... 23
`
`West Virginia v. EPA,
`142 S. Ct. 2587 (2022) .................................................................................................... 22
`
`Wisconsin Gas Co. v. FERC,
`758 F.2d 669 (D.C. Cir. 1985) ...................................................................................... 23
`
`
`
`iv
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 6 of 34
`
`
`WMATA v. Holiday Tours, Inc.,
`559 F.2d 841 (D.C. Cir. 1977) ....................................................................................... 23
`
`Statutes
`
`7 U.S.C. § 7a-2(c)(5)(C)(i)(I) .................................................................................................. 1
`
`7 U.S.C. § 7a-2 (c)(5)(C)(i)(V) ............................................................................................... 1
`
`7 U.S.C. § 9 ............................................................................................................................ 14
`
`7 U.S.C. § 13(a)(2) ................................................................................................................. 14
`
`Regulations
`
`17 C.F.R. § 38 ........................................................................................................................ 13
`
`17 C.F.R. § 38.150 ................................................................................................................ 12
`
`17 C.F.R. § 38.200 ................................................................................................................ 12
`
`17 C.F.R. § 38.250 ................................................................................................................ 12
`
`Other Sources
`
`D.C. Cir. R. 41(a)(2) ............................................................................................................. 23
`
`ForecastEx LLC Rulebook (Sept. 17, 2024)
`https://forecastex.com/regulatory .............................................................................. 13
`
`FY 2023 Enforcement Results, CFTC PRESS RELEASE (Nov. 7, 2023)
`https://www.cftc.gov/PressRoom/PressReleases/8822-23 .................................... 14
`
`Niall Ferguson & Manny Rincon-Cruz, How the Trump Whale and Prediction Markets Beat
`the Pollsters in 2024, WALL ST. J. (Nov. 15, 2024) .......................................... 16, 19, 20
`
`
`
`
`
`
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`
`
`
`
`v
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 7 of 34
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`Paul Rhode and Koleman Strumpf, Historical Presidential Betting Markets. JOURNAL OF
`ECONOMIC PERSPECTIVES, Vol. 18, No. 2 (Spring 2004).......................................... 18
`
`Ryan Oprea, Robin Hanson, and David Porter, Information Aggregation and Manipulation
`in an Experimental Market, JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION,
`60 (2006) ...................................................................................................................... 18,19
`
`Tyler Yeargain, The Rise of Fake Polls and the Case for Criminal Liability, 85 MO.L.REV.
`129 (2020) ........................................................................................................................ 21
`
`
`
`
`
`vi
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 8 of 34
`
`
`CFTC:
`
`Commodity Futures Trading Commission
`
`GLOSSARY
`
`CEA:
`
`Commodity Exchange Act
`
`DCMs:
`
`Designated Contract Markets
`
`GDP:
`
`Gross Domestic Product
`
`FEC:
`
`Federal Election Commission
`
`SEC:
`
`Securities and Exchange Commission
`
`
`
`vii
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 9 of 34
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`STATEMENT OF INTEREST OF AMICUS CURIAE *
`
`Amicus curiae ForecastEx, LLC (ForecastEx) is a CFTC-registered Designated
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`Contract Market (DCM) and Derivatives Clearing Organization (DCO). It is subject to
`
`the Commodity Exchange Act (CEA), including the CEA’s special rule for the review
`
`of event contracts that authorizes the CFTC to review and prohibit trading in event
`
`contracts that are contrary to the public interest, if (and only if) those contracts involve
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`specific activities including “activity that is unlawful under any Federal or State law” or
`
`“gaming.” 7 U.S.C. §§ 7a-2(c)(5)(C)(i)(I),(V).
`
`ForecastEx started providing access to ForecastEx election-based forecast
`
`contracts for eligible customers in October 2024 after this Court denied the CFTC’s
`
`motion to stay the district court’s decision pending appeal. These include contracts
`
`concerning the outcome of the presidential election, control of the Senate, control of
`
`the House, and the outcome of key congressional races. The addition of election-based
`
`contracts allowed US-based investors to trade their predictions on these political
`
`outcomes, alongside contracts ForecastEx already offered on economic data releases
`
`and climate indicators, through the ForecastEx exchange. Like ForecastEx’s other
`
`
`* All parties consent to the filing of this brief. No counsel for any party in this case
`authored this brief in whole or in part. No person or entity—other than amicus and its
`counsel—made a monetary contribution specifically for the preparation or submission
`of this brief. Counsel for ForecastEx certify that, to their knowledge, no other amicus
`brief focuses on the same issues as this brief or the unique perspective amicus provides
`on the First Amendment and public interest analysis.
`
`1
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`

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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 10 of 34
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`contracts, the election-based contracts give participants a powerful tool to manage the
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`risk associated with uncertainty that affects their business operations and investment
`
`portfolios. Participants’ trades express their views on key global events. The aggregation
`
`of these views reflects a consensus view on the probability of a certain election outcome
`
`derived from the collective wisdom of entities and individuals who have economic
`
`stakes in making accurate predictions. That wisdom is available in the form of contract
`
`prices to the public, including politicians and key decisionmakers.
`
`ForecastEx has a strong interest in the use of all event contracts, including
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`political event contracts. As of November 6, 2024, ForecastEx hosted over $560 million
`
`of trades in presidential election contracts since early October.
`
`ForecastEx’s bottom line and ability to appeal to the public will be impaired if
`
`the CFTC’s statutory interpretation and public interest determinations prevail. If
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`allowed to proceed, ForecastEx and other prediction markets will be increasingly
`
`utilized by the public based on demonstrated success and increasingly appreciated as a
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`valuable tool that offers unique data and insights that, as recent experience confirms,
`
`cannot be captured by traditional mediums like polling.
`
`2
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`

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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 11 of 34
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`
`ARGUMENT
`
`ForecastEx agrees with the District Court and Kalshi’s analysis that the CEA’s
`
`special rule that gives the CFTC authority to regulate certain event contracts that are
`
`against the public interest does not apply to election-based event contracts.
`
`
`
`However, even assuming arguendo that this Court finds the statutory construction
`
`arguments presented by both parties plausible, under the Supreme Court’s application
`
`of constitutional avoidance, it must reject the CFTC’s interpretation because that
`
`interpretation raises serious First Amendment issues. The First Amendment protects
`
`speech on matters of public concern such as predictions about elections expressed
`
`through the purchase of ForecastEx contracts. The First Amendment protects such
`
`speech no less than a newspaper op-ed predicting a political victory or defeat. The
`
`aggregation of the views of all the traders into a contract price reflecting a collective
`
`probabilistic assessment about an election outcome is likewise protected by the First
`
`Amendment. The First Amendment also supports the rights of the public to receive
`
`and then use this election-related information to make important decisions.
`
`The CFTC’s restriction is content-based because it excludes only election-based
`
`event contracts. This content-based restriction on a matter of public concern fails strict
`
`scrutiny for three reasons.
`
`First, insulating voters from outside influences based on concerns about how
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`people will react to the information is not a compelling governmental interest. Second,
`
`3
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`

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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 12 of 34
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`even assuming “election integrity” constitutes a valid governmental interest, the
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`Government has less restrictive means to achieve that interest. Indeed, the Government
`
`has provided no evidence to undercut the myriad comments and empirical data
`
`provided to it by commenters that market manipulation is self-correcting because it
`
`induces informed traders to enter the market. Third, even assuming the CFTC’s
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`restriction does advance the Government’s interest, it is fatally underinclusive because
`
`it fails to reach much of the speech that implicates the Government’s interest in
`
`protecting election integrity. This is the case because there is a plethora of inaccurate
`
`existing information in the election prediction ambit including punditry, polls, and
`
`models that predict results and that could be used “in ways that would have an adverse
`
`effect on the integrity of elections, or the perception of integrity of elections.” App.
`
`146.
`
`Separately, even if this Court disagrees that the CFTC’s interpretation raises a
`
`serious First Amendment doubt and decides to reach the CFTC’s public interest
`
`determination, it should nevertheless affirm the District Court’s judgment because
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`ForecastEx’s experience with political event contracts refutes the CFTC’s thinly
`
`supported public interest analysis. The CFTC’s election integrity concerns are
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`speculative and belied by ForecastEx’s experience with these contracts as well as the
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`history discussed in detail by several commenters that shows that in the United States
`
`and worldwide, election trading has not resulted in manipulation or fraud. The CFTC
`
`fails to present a reasoned basis to disregard this evidence or to explain why traditional
`
`4
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`

`

`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 13 of 34
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`tools and requirements for regulating market manipulation under the CFTC’s current
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`regime, including criminal penalties, are insufficient. There is no evidence to support
`
`the CFTC’s cursory assertion that allowing election contracts to trade will force it to
`
`regulate elections. To the contrary, the CFTC has not become entangled in policing the
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`production, warehousing, and transportation of agricultural and energy products or any
`
`other area related to a derivative contract under its purview.
`
`I.
`
`THIS COURT SHOULD AVOID INTERPRETING POLITICAL EVENT
`CONTRACTS TO BE EITHER “GAMING” OR “CONTRARY TO FEDERAL OR
`STATE LAW” BECAUSE HOLDING OTHERWISE WOULD RAISE SERIOUS
`CONSTITUTIONAL QUESTIONS UNDER THE FIRST AMENDMENT.
`
` “A statute must be construed, if fairly possible, so as to avoid not only the
`
`conclusion that it is unconstitutional but also grave doubts upon that score.” United
`
`States v. Jin Fuey Moy, 241 U.S. 394, 401 (1916); see also Public Citizen v. U.S. Department of
`
`Justice, 491 U.S. 440, 455, 462–63, 466 (1989) (rejecting “plain-meaning” rule to avoid
`
`constitutional difficulties). The Supreme Court has repeatedly reaffirmed constitutional
`
`avoidance in the First Amendment ambit. For example, in United States v. Rumely, 345
`
`U.S. 41, 47 (1953), it interpreted the phrase “lobbying activities” in a resolution passed
`
`by Congress to avoid an interpretation that would create a serious constitutional doubt
`
`by proscribing conduct protected by the First Amendment.1 Here Congress has not
`
`
`1 Its rationale rested in part on separation of powers considerations: “Whenever
`constitutional limits upon the investigative power of Congress have to be drawn by this
`Court, it ought only to be done after Congress has demonstrated its full awareness of
`what is at stake by unequivocally authorizing an inquiry of dubious limits.” Id. at 46.
`
`5
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`

`

`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 14 of 34
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`delegated to the CFTC the authority to challenge the boundaries of the First
`
`Amendment and the CFTC must not do so.
`
`A. Election-based Contracts Reflect Archetypical Speech on Matters
`of Public Concern Within the First Amendment because of the
`Interests of both the Speaker (each market participant and
`ForecastEx) and the Audience (the public).
`
`The First Amendment reflects the “profound national commitment” to the
`
`principle that “debate on public issues should be uninhibited, robust, and wide-open,”
`
`New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964), because speech on matters of
`
`public concern “is more than self-expression; it is the essence of self-government,”
`
`Garrison v. Louisiana, 379 U.S. 64, 74–75 (1964). Accordingly, speech on public issues
`
`occupies the “highest rung of the hierarchy of First Amendment values” and is entitled
`
`to “special protection.” Connick v. Myers, 461 U.S. 138, 145 (1983). Speech about
`
`elections, candidates, and governmental affairs is “core political speech.” McIntyre v. Ohio
`
`Elections Comm’n, 514 U.S. 334, 347 (1995); see also Mills v. Alabama, 384 U.S. 214, 218
`
`(1966). Thus, ForecastEx’s election-based contracts address matters of public
`
`importance under the First Amendment. As the District Court explained, Kalshi’s
`
`contracts “involve elections (and politics, congressional control, and other related
`
`topics)” but “not illegal activities.” App. 106, 111. Importantly, profit motive plays no
`
`role in the First Amendment inquiry. See Pittsburgh Press Co. v. Pittsburgh Comm’n on Hum.
`
`Rels., 413 U.S. 376, 385 (1973) (holding that a newspaper’s profit motive does not bear
`
`on the nature of the speech contained within or the tier of scrutiny applied thereto); see
`
`6
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`

`

`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 15 of 34
`
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`also Daily Herald Co. v. Munro, 838 F.2d 380, 384 (9th Cir. 1988) (rejecting argument that
`
`exit polling is commercial speech that is less deserving of constitutional protection than
`
`speech on matters of public concern merely because the pollsters make money by
`
`disseminating exit polls).
`
`The special protection afforded to speech on matters of public concern extends
`
`to each individual market participant as well as to ForecastEx. Each market participant
`
`is offering his opinion on the outcome of an uncertain future election. This is expressive
`
`speech covered by the First Amendment to the same extent as an op-ed predicting the
`
`winner of an election. See Sorrell v. IMS Health, Inc., 564 U.S. 552, 567, 570 (2011) (stating
`
`that there is a strong argument that “information is speech” and holding that speech
`
`that results from an “economic motive” is still subject to strict scrutiny and includes “a
`
`great deal of vital expression”).2
`
`
`2 Whether purchasing election-based contracts is classified as actual speech or
`expressive conduct makes no difference because both are equally protected by the First
`Amendment, and strict scrutiny applies to content-based restrictions of both. See
`Brooklyn Branch of Nat’l Ass’n for Advancement of Colored People v. Kosinski, 657 F. Supp. 3d
`504, 528-29 (S.D.N.Y. 2023). To be considered expressive conduct, an activity need not
`communicate a “narrow, succinctly articulable message,” Hurley v. Irish-Am. Gay, Lesbian
`& Bisexual Grp. of Bos., 515 U.S. 557, 569 (1995), and need not even be interpreted to
`convey the same message by each person, so long as a reasonable person would infer
`“some sort of message” from it, see Kosinski, 657 F. Supp 3d. at 521 (adopting consensus
`view that handing out water to voters in line at the polls is expressive conduct because
`it could be interpreted to support voting). At the very least, purchasing an election-
`based contract is expressive conduct because a reasonable person can infer a prediction
`about the election from it.
`
`7
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`

`

`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 16 of 34
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`ForecastEx’s First Amendment rights are implicated for two related and mutually
`
`reinforcing reasons. First, its expressive rights are implicated when it decides which
`
`contracts to offer and decides how to display the results because the First Amendment
`
`protects compiling others’ speech as much it protects the original speech. As the
`
`Supreme Court made clear in deciding that a parade organizer is protected by the First
`
`Amendment—even though the parade simply consists of others’ floats: “[T]he
`
`presentation of an edited compilation of speech generated by other persons is a staple
`
`of most newspapers’ opinion pages, which, of course, fall squarely within the core of
`
`First Amendment security, as does even the simple selection of a paid noncommercial
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`advertisement for inclusion in a daily paper.” Hurley, 515 U.S. at 570 (internal citations
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`omitted). ForecastEx decides which elections to offer contracts on and sets conditions
`
`on those contracts. It is organizing the markets using its judgment much like when
`
`Google decides which search results to display. See Jian Zhang v. Baidu.com Inc., 10 F.
`
`Supp. 3d 433, 439 (S.D.N.Y. 2014) (concluding that a search engine’s ranking of pages
`
`was “fully protected First Amendment expression”). Further, the parade in Hurley was
`
`highly unselective allowing nearly all applicants to march. Hurley, 515 U.S. at 569-70.
`
`ForecastEx is highly selective and offers contracts on only a subset of elections and
`
`global events. Further, ForecastEx prohibits various individuals likely to have inside
`
`information from trading in any contracts. Its selectivity is comparable to newspaper
`
`op-ed pages, which feature at most a small fraction of potential submissions. Therefore,
`
`8
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 17 of 34
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`even if ForecastEx is not making predictions like the market-participants, its judgments
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`and opinions are fully protected by the First Amendment.
`
`Second, and relatedly, ForecastEx’s aggregation of each market participant’s
`
`speech into a clearing price for dissemination to the public at large is protected by the
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`First Amendment, which not only values self-expression but also the rights of
`
`listeners/recipients and thus includes a mandate “to prohibit government from limiting
`
`the stock of information from which members of the public may draw.” First National
`
`Bank of Boston v. Bellotti, 435 U.S. 765, 783 (1978); see also Daily Herald, 838 F.2d at 384
`
`(holding that exit polling is protected as expressive “speech” because the information
`
`disseminated is speech on matters of public concern). Critically, the First Amendment
`
`right to gather news and information for public dissemination is not limited to the press
`
`which has neither “a monopoly on . . . the First Amendment [n]or the ability to
`
`enlighten.” Id. at 782. Indeed, the Supreme Court has repeatedly referred to “a First
`
`Amendment right to receive information and ideas” across a variety of contexts.
`
`Kleindienst v. Mandel, 408 U.S. 753, 762 (1972) (citation omitted).
`
`1.
`
`The CFTC’s Content-based Restriction Fails Strict Scrutiny.
`
`Laws that target speech “because of the topic discussed” are presumptively
`
`unconstitutional and subject to the strictest scrutiny as content-based regulations. See
`
`Reed v. Town of Gilbert, 576 U.S. 155, 163-64 (2015); see also Citizens United v. Fed. Election
`
`Comm’n, 558 U.S. 310, 340 (2010) (“Premised on mistrust of governmental power, the
`
`9
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 18 of 34
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`First Amendment stands against attempts to disfavor certain subjects.”). Thus, the
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`CFTC’s restriction is subject to strict scrutiny, meaning that the Government must
`
`prove that a restriction “furthers a compelling interest and is narrowly tailored to
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`achieve that interest.” Citizens United, 558 U.S. at 340.
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`Compelling Interest: Critically, compelling governmental interests to justify
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`speech regulation do not include a general interest in insulating voters from outside
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`influences. See Daily Herald Co., 838 F.2d at 387 (“Just as with election-day broadcasts
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`or newspaper editorials that may affect voter choices, regulating [the taking of exit polls]
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`. . . on the basis that [broadcasting early returns while polls remain open] . . . might
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`indirectly affect the voters’ choice [in those states] is impermissible”); see also Vanasco v.
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`Schwartz, 401 F. Supp. 87, 100 (S.D.N.Y. 1975) (three-judge court) (“[W]hen the State
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`through the guise of protecting the citizen’s right to a fair and honest election tampers
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`with what it will permit the citizen to see and hear even that important state interest
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`must give way to the irresistible force of protected expression under the First
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`Amendment.”), aff’d mem., 423 U.S. 1041 (1976). At bottom, the CFTC wants to restrict
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`information for fear that voters will be swayed by what it views as an inaccurate and
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`easily manipulable signal as compared to traditional signals like polls. But the First
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`Amendment leaves that judgment to the people, not the CFTC.
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`Furthers Government Interest. The Government has provided no evidence
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`that restricting election-based contracts will result in less manipulation and more
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`10
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 19 of 34
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`election integrity. To the contrary, all its claims are premised upon unjustified
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`speculation that is undermined by the rich tapestry of empirical and historical evidence
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`discussed in detail below. See infra pp. 12-21.
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`Narrowly Tailored: A content-based restriction on speech necessarily fails strict
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`scrutiny when counter speech is available as a remedy to achieve the Government’s
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`stated interest. See United States v. Alvarez, 567 U.S. 709, 726-27 (2012). “This is the
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`ordinary course in a free society. The response to the unreasoned is the rational; to the
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`uninformed, the enlightened; to the straightout lie, the simple truth.” Id. at 727. The
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`evidence shows that the market harms are self-correcting here because manipulated
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`prices induce market participants to enter orders to benefit from resulting market
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`dislocation. See infra pp. 12-21.
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`In sum, the serious First Amendment issues raised by the CFTC’s attempt to
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`restrict these political event contracts counsel affirming the District Court’s decision.
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`II.
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`FORECASTEX’S EXPERIENCE WITH POLITICAL EVENT CONTRACTS
`REFUTES THE CFTC’S THINLY SUPPORTED PUBLIC INTEREST ANALYSIS.
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`ForecastEx has allowed trading in various political event contracts since this
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`Court refused to order a stay of the District Court’s decision in October 2024.
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`11
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`USCA Case #24-5205 Document #2087020 Filed: 11/27/2024 Page 20 of 34
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`ForecastEx’s experience and observation of the trading of political event contracts bely
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`the concerns that the CFTC identified in its public interest analysis.3
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`A. The CEA and CFTC Rules Have Significant and