Argued September 19, 2024 Decided October 2, 2024

No. 24-5205

KALSHIEX LLC, APPELLEE

v.

COMMODITY FUTURES TRADING COMMISSION, APPELLANT

On Emergency Motion for Stay Pending Appeal and Immediate Interim Relief (No. 1:23-cv-03257)

Robert A. Schwartz, General Counsel, U.S. Commodity Futures Trading Commission, argued the cause for appellant. With him on the emergency motion for stay pending appeal and immediate interim relief and the reply was Anne W. Stukes, Deputy General Counsel.

Yaakov M. Roth argued the cause for appellee. With him on the opposition to the emergency motion for stay pending appeal and immediate interim relief were Joshua B. Sterling, John Henry Thompson, and Amanda K. Rice.

Before: MILLETT, PILLARD, and PAN, Circuit Judges. 2 Opinion for the Court filed by Circuit Judge MILLETT.

MILLETT, Circuit Judge: KalshiEx LLC, a commodities exchange regulated by the Commodity Futures Trading Commission, seeks to offer “Congressional Control Contracts” that would allow persons within the United States to place money on the outcome of the November 2024 congressional elections. The Commission prohibited Kalshi from listing the Congressional Control Contracts on its regulated exchange on the ground that they amount to gaming or election gambling, which many States outlaw. Kalshi challenged that determination in federal court under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), (C). The district court found that the Commission erred in categorizing the Congressional Control Contracts as involving either gaming or gambling and vacated its decision. The Commission now seeks a stay of the district court’s judgment while it pursues an appeal. Because the Commission has failed at this time to demonstrate that it or the public will be irreparably injured absent a stay, we deny its motion without prejudice to renewal should more concrete evidence of irreparable harm develop during the pendency of this appeal.

I

A

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is an independent federal agency charged under the Commodity Exchange Act with regulating derivative markets. 7 U.S.C. § 2(a). 1 This case concerns a 1 A derivative is a “financial instrument” or contract, such as a future, option, or swap, the price of which is “directly dependent 3 subset of derivative contracts known as “event contracts.” An event contract is a derivative contract for which the “payoff is based on a specified event, occurrence, or value”—for example, the level of snowfall from a certain storm or the dollar amount of hurricane damage. CFTC, Contracts & Products: Event Contracts, https://perma.cc/4FPT-L2SN. Businesses and individuals can use event contracts to hedge against economic risk. KalshiEX LLC v. Commodity Futures Trading Comm’n, No. 23-cv-3257 (JMC), 2024 WL 4164694, at *2 (D.D.C. Sept. 12, 2024). For example, a beachfront property owner might purchase an event contract predicting that a hurricane will reach landfall in her area to offset the risk of losing rental income from the storm. Id.

Under the Commodity Exchange Act, only federally regulated exchanges, known as “Designated Contract Markets” (“Designated Markets”), can offer event contracts. 7 U.S.C. §§ 2(e), 7a-2(c)(5)(C)(i); see also 7 U.S.C. § 1a(19)(iv). Designated Markets can self-certify to the Commission that the contracts comply with the Commodity Exchange Act and the Commission’s regulations and start trading the contracts the following business day. 7 U.S.C. § 7a-2(c)(1), 17 C.F.R. § 40.2.

However, the Commodity Exchange Act includes a “Special Rule” under which the Commission can review and prohibit specific types