Public Statements & Remarks

Dissenting Statement of Commissioner Caroline D. Pham on Political Event Contracts

June 23, 2023

I respectfully dissent regarding this matter because I believe that the United States Court of Appeals for the Fifth Circuit’s Order in Clarke et al. v. CFTC, No. 22-51124 (5th Cir.), may prevent the Commission from suspending or prohibiting the listing or trading of KalshiEx LLC’s (Kalshi) certified congressional control political event contracts.[1]

On May 1, 2023, the Fifth Circuit issued an Order that, among other things, enjoined the Commission from “closing the PredictIt Market” or otherwise “prohibiting or deterring the trading of [PredictIt] Market contracts,” until 60 days after a final judgment in that case.  See Clarke v. CFTC, No. 22-51124 (5th Cir. May 1, 2023) (unpublished order).

If the Commission were to request the suspension of listing and trading on Kalshi’s political event contracts under CFTC Rule 40.11(c)(1), or issue an Order prohibiting the listing and trading of such contracts under CFTC Rule 40.11(a)(1), either of these acts by the Commission could be construed to implicate the Fifth Circuit’s May 1 Order because the PredictIt Market also lists political event contracts.

For example, if the Commission were to determine that Kalshi’s political event contracts [2]involve or relate to “gaming” under Commodity Exchange Act Section 5c(c)(5)(C) and Rule 40.11, and are therefore prohibited from trading on the Kalshi market, it is reasonable to infer that the practical effect of such an Order would be to prohibit, or at least deter, the trading of political event contracts on the PredictIt Market.

Because I cannot take any action that may be construed to violate the Fifth Circuit’s Order enjoining the Commission from otherwise “prohibiting or deterring the trading” of contracts listed on the PredictIt Market, and because political event contracts are listed on the PredictIt Market, I therefore must respectfully dissent from the Commission’s decision pursuant to CFTC Rule 40.11 to require a review and impose a stay of up to 90 days, and consequently request the suspension of listing and trading, on Kalshi’s political event contracts.  Further, I incorporate by reference the entirety of my prior dissent dated August 26, 2022.

Congress has mandated that the CFTC promote responsible innovation and fair competition.[3]  As I stated in my prior dissent,[4] the Commission must apply our rules fairly.  At this time, the Fifth Circuit has enjoined the Commission, with the practical effect of allowing an unregistered event contract market, the PredictIt Market, to continue to operate its political control markets.[5]

In the interest of applying principles of fair competition and fair treatment to similar contract markets, Kalshi, a CFTC registered entity, should also be allowed to operate their political control markets.  I believe that it is only fair for either both exchanges to list the political control contracts, or neither of them should.

[1] Kalshi certified the contracts under CFTC Rule 40.2 with an intended listing date of June 27, 2023.

[2] Hon. Caroline D. Pham, “Dissenting Statement of Commissioner Caroline D. Pham Regarding the Review and Stay of KalshiEx LLC’s Political Event Contracts,” (Aug. 26, 2022).

[3] 7 U.S.C. § 5(b).

[4] See FN 2, supra.

[5] CFTC Letter No. 22-08, Withdrawal of CFTC Letter No. 14-130 (Aug. 4, 2022).  As of August 15, 2022, PredictIt lists contracts on whether the Democrat or Republican party will control the Senate after 2022, and whether the Democrat or Republican party will win the House in 2022.