Comment Text:
Public Comment *Proposed Rule 91 FR 12516*
I am a 20-year-old junior college student from Texas, studying economics. I am not a lawyer. I have no financial industry affiliation. I am submitting this comment because I watch Kalshi being marketed to my classmates every day, because I understand enough economics to know that what Kalshi offers is not what it claims to be, and because the Commission's own questions reveal that it already suspects the answers — it simply needs the public to say them plainly.
I will address the Commission's questions directly.
On the Public Interest Standard (Questions 7–11)
The CEA's public interest framework exists for a specific reason: derivative markets are permitted to operate because they serve society by enabling price discovery and the transfer of genuine commercial risk. The Commission asks how it should apply this standard to prediction markets. The answer requires asking one threshold question that the Commission has avoided asking directly: who, among Kalshi's retail users, has a legitimate commercial risk to hedge?
The answer is no one. A 20-year-old betting on whether the Fed will cut rates has no underlying interest rate exposure to hedge. A college student wagering on a Senate race has no commercial exposure to that election's outcome. Without a hedging constituency, there is no risk transfer function. Without a risk transfer function, there is no economic justification cognizable under the CEA. What remains is speculation on binary outcomes — which is gambling, regardless of what the platform calls it.
The Commission's question 10 asks how event contracts contribute to "managing and assuming price risks" under CEA section 3(a). For retail prediction market contracts, the honest answer is: they do not. The Commission should incorporate this finding directly into its public interest determination and conclude that retail binary event contracts without an identifiable hedging constituency fail the CEA's foundational public interest standard.
On Gaming (Question 19)
The Commission asks what factors should define "gaming" under CEA section 5c(c)(5)(C) and whether characteristics like entertainment purpose or an element of chance are relevant. They are — and Kalshi's contracts satisfy both.
Kalshi's contracts on award show outcomes, celebrity events, and sports results have an explicit entertainment purpose. Its political and economic contracts, while dressed in the language of finance, are purchased overwhelmingly by retail participants with no economic stake in the underlying outcome — making them functionally entertainment as well. Every contract resolves as a binary wager on an uncertain outcome. That is the textbook definition of a game of chance.
The Commission asks in question 19(d) whether the youth skew of prediction market participants should inform its determination. It should — decisively. The neuroscience of adolescent and young adult risk assessment is not ambiguous: the prefrontal cortex is not fully developed until the mid-twenties, making people my age structurally more susceptible to the variable-reward cycles that binary gambling products exploit. Kalshi markets aggressively on TikTok, Instagram, and YouTube — platforms whose audiences are overwhelmingly under 30. That is not coincidence. It is targeting.
The Commission asks about responsible gaming standards in question 19(e). I will answer concretely: deposit limits, mandatory loss alerts, cooling-off periods, self-exclusion registries, and a prohibition on promotional incentives are the minimum standards required of every licensed gambling operator in Texas. Kalshi has none of them. The Commission should require all of them as an immediate condition of continued DCM registration — and should recognize that an operator unwilling to meet these standards has no business serving retail participants.
On Unlawful Activity Under State Law (Question 16)
The Commission asks how to handle event contracts that would be unlawful under some state laws. In Texas, operating a gambling business without a state license is a felony. Kalshi's retail binary event contracts — wagers on binary outcomes with no commercial hedging function — would constitute illegal gambling under Texas law if offered by any operator without a CFTC registration.
The Commission should confront this directly: its DCM designation is functioning as a federal preemption shield that allows Kalshi to offer an illegal gambling product in Texas and most other states. This was not the intent of the CEA. The Commission should not allow its registration process to be weaponized against state consumer protection laws that exist specifically to protect residents like my classmates.
The Commission's question asks what steps it should take to evaluate which state laws are implicated. The answer is straightforward: if a product would require a state gambling license to be legally offered in a given state, and the operator does not hold that license, the Commission should treat CFTC registration as insufficient authorization and require the operator to demonstrate compliance with applicable state law or cease operations in that state.
On Manipulation and Inside Information (Questions 29–32)
The Commission asks whether prediction markets are more susceptible to manipulation than other derivative markets. For political contracts, the answer is unambiguously yes — and the mechanism is structural, not incidental.
Political event contracts create direct financial incentives for the people who control the underlying outcomes — legislators, executive branch officials, campaign operatives, and their staff — to trade on information they possess by virtue of their positions. CEA sections 4c(a)(3) and 4c(a)(4) prohibit federal employees from trading on nonpublic government information, but the Commission has brought no enforcement actions in this space despite thousands of political contracts now being actively traded. That enforcement vacuum is a standing invitation to insider trading at the intersection of financial markets and democratic governance.
The Commission asks in question 30 whether events controlled by a small number of individuals pose particular manipulation risks. Yes — and political outcomes are precisely this type of event. A senator's vote, a regulatory decision, an appointment announcement: these are outcomes controlled by single individuals who may hold financial positions in contracts tied to those outcomes or may share information with those who do. No surveillance infrastructure the Commission currently operates is adequate to detect this activity at scale across thousands of contracts.
The Commission should prohibit political event contracts entirely. The manipulation risk is not manageable through disclosure or position limits. It is structural and inherent to the product.
On the Self-Certification Process (Questions 23–26)
The Commission asks what factors should inform its approach to the listing process for event contracts. I will answer with a number: 1,600. That is how many event contracts Kalshi and other DCMs certified for listing in 2025 alone — up from an average of five per year before 2021. The Commission reviewed none of them substantively before they went live. One business day's notice is not regulatory oversight. It is a filing formality.
The self-certification process was designed for incremental variations on well-understood contract types in mature markets. It is not appropriate for an industry listing hundreds of novel contracts monthly covering political outcomes, celebrity events, and sporting results. The Commission should suspend self-certification for all retail event contracts immediately and require mandatory prior approval with explicit public interest findings before any new contract category may be listed.
On Costs and Benefits (Questions 6, 14, 22, 38)
The Commission repeatedly asks about cost-benefit considerations. Here is the analysis as it applies to my generation:
The costs of strong regulatory action, including prohibition of retail binary event contracts: Kalshi's investors lose a business built on regulatory arbitrage. Participants lose a gambling venue — and retain access to every other legal gambling option available to them.
The benefits: College students and young adults are protected from a product specifically engineered to exploit the psychological vulnerabilities of people my age. State consumer protection laws are no longer preempted by a federal registration obtained specifically to circumvent them. The integrity of political information is no longer compromised by financial markets in electoral outcomes. And the Commission's enforcement resources are no longer stretched across thousands of novel contracts its surveillance infrastructure was never designed to monitor.
There is no honest cost-benefit analysis that favors the status quo. The costs of inaction are borne by people like my classmates. The benefits of inaction are captured entirely by Kalshi's shareholders.
Conclusion
The Commission's ANPRM asks sophisticated questions. But sophisticated questions cannot obscure a simple reality: Kalshi is a gambling company that obtained a commodity exchange license and has used it to market addictive binary gambling products to college students and young adults while evading every consumer protection that licensed gambling operators are required to provide.
The Commission has authority under CEA section 5c(c)(5)(C) to prohibit contracts contrary to the public interest. It has authority to revoke DCM designations. It has authority to require responsible gambling protections as a condition of registration. It has had all of this authority since Kalshi launched. The only thing that has been missing is the will to use it.
I am asking the Commission to find that will — before more of my classmates lose their tuition money, their savings, and their financial futures to a product that should never have been permitted to call itself a commodity exchange.
