There is another fundamental flaw in Kalshi's legal argument.

Kalshi's 'sports-outcome' event contracts may not qualify as an "excluded commodity" for purposes of triggering the CFTC's exclusive jurisdiction.

Here's why:

1) Under the Commodity Exchange Act (the CEA), "event contracts" are defined as "agreements contracts, transactions, or swaps in excluded commodities."

2) In other words, "event contracts" are subject to regulation under the CEA as an "excluded commodity."

3) What is an "excluded commodity"?

4) The CEA defines "excluded commodity" as an "occurrence, extent of an occurrence, or contingency" that is “beyond the control of the parties to the relevant contract" and "associated with a financial, economic, or commercial consequence."

5) The key words are "associated with a financial, economic, or commercial consequence."

6) So, are the outcomes of sporting events "associated with a financial, economic, or commercial consequence"?

7) Kalshi previously took the position that they are not.

8) In a brief filed on November 15, 2024 with the D.C. Circuit, Kalshi explained that "contracts relating to games—again, activities conducted for diversion or amusement—are unlikely to serve any ‘commercial or hedging interest.’” (📸)

9) During the May 30, 2024 oral argument in its lawsuit with the CFTC, Kalshi asserted that contracts relating to "games" such as "football, horseracing and golf" have "no economic significance," adding that "it's probably not the type of contracts that we want to be listed on an exchange, because they don't have any real economic value."

10) Kalshi has since reversed field.

11) In a Reply Brief filed earlier this week, Kalshi argued that the "sporting events" for which if offers event contracts "have obvious financial implications," pointing to Rory Mcllroy's sudden-death playoff win in the 2025 Masters which resulted in increased television viewership—reportedly a 33% increase over the prior year—"with enormous financial consequence for CBS and its advertisers."

12) But it's not the sporting event itself which is the measuring stick. The fact that broadcast rights associated with major sporting events are financially consequential does not, a fortiori, mean that the “outcome” of the sporting event is “associated with” a financial, economic, or commercial consequence.

13) Otherwise, as incoming CFTC Chairman Brian Quintenz has opined, “since practically any event has at least a minimal financial, commercial, or economic consequence, ALL events are commodities."

14) The more salient question —and the one actually raised by the definition of "excluded commodity"— is whether the "OUTCOME" of the event is "ASSOCIATED WITH" a "financial, economic, or commercial consequence"?

15) In other words, the relevant inquiry is whether Rory Mcllroy winning the Masters is "associated with" (i.e., connected to) financial consequences, not whether CBS makes money from streaming the event, as the Casino Association of New Jersey explained in an amicus brief filed last week.

16) The answer to that question would appear to be "no" — that is, other than to the competitors themselves (such as Mr. Mcllroy, who earned $4.2 million for winning the Masters).

17) So an “excluded commodity” could be yes/no for Las Vegas to host the 2029 Super Bowl, but not the outcome of the game.

18) It is ironic that Kalshi urged a narrow definition of “gaming” in its lawsuit against the CFTC, but is now urging a broad definition of “economic consequence.” 19) Now contrast that with the “examples” of “events” that the CFTC lists on its website as illustrative of an “event contract”:

“Macroeconomic indicators, corporate earnings, level of snowfall, or dollar value of damages caused by a hurricane.”

Key distinction = macroeconomic