Comment Text:
Public Comment: RIN 3038-AF65 — Direct Rebuttal to Comment of Arjun Sawai, Market Operations, Kalshi Inc.
Submitted to: Christopher Kirkpatrick, Secretary of the Commission, CFTC
Re: Advance Notice of Proposed Rulemaking on Prediction Markets
Date: April 30, 2026
I am a college student and a Kalshi user who has lost over $3,000 on this platform. I am submitting this comment in direct rebuttal to the comment filed by Arjun Sawai of Kalshi's Market Operations team in support of “Mentions Markets" — contracts that pay out based on whether a specific named individual says a specific word during a specific public event. Mr. Sawai's comment, on honest reading, is a request for the Commission to approve something no regulatory framework in the world was designed to handle. I want to explain why, directly addressing the Commission's own questions.
1. Let's Be Clear About What This Product Actually Is
Before engaging Mr. Sawai's academic framework, the Commission should understand what Mentions Markets are in plain language. Kalshi is asking the Commission to approve binary gambling contracts on whether Jerome Powell will say "patient" at a press conference. Whether a CEO will say "headwinds" on an earnings call. Whether a congressman will utter a particular word during a hearing.
Mr. Sawai surrounds this product with citations to the Journal of Finance, the Journal of Economic Literature, and Federal Reserve research papers. The Commission should not allow that intellectual scaffolding to obscure what sits underneath it: a bet on a specific person's word choice. That is the product. The Commission should evaluate the product.
2. The Manipulation Risk Is Not "Narrow." It Is Uniquely Concentrated. (Questions 2c, 29-32)
The Commission asks in Core Principle 3 and questions 29 through 32 how it should evaluate manipulation susceptibility and insider trading risk. Mr. Sawai's answer is that Mentions Markets are actually safer than other derivatives because the universe of potential manipulators is "unusually narrow" — just the named speaker, their family, their communications staff, and their executive assistants.
The Commission should read that argument carefully, because Mr. Sawai has accidentally made the strongest possible case against these contracts.
In a commodity futures market, manipulating the underlying price requires moving a physical market involving thousands of producers, consumers, and intermediaries. The barrier is enormous. In a Mentions Market, manipulation requires exactly one thing: a conversation between the named speaker and anyone in their inner circle about which word to use. The "narrow" universe Mr. Sawai describes is not a safety feature. It is a description of how extraordinarily low the barrier to manipulation is. No other derivative market the Commission oversees can be manipulated by a single private conversation about vocabulary.
Core Principle 3 requires that DCMs list only contracts "not readily susceptible to manipulation." A contract whose resolution can be determined by one person choosing between near-synonymous adjectives — "patient" versus "cautious," "transitory" versus "temporary" — is the definition of readily susceptible to manipulation by that person. Mr. Sawai's surveillance proposals address detection after the fact. They do not address the structural reality that these contracts can be manipulated before anyone trades a single dollar, in a conversation that leaves no electronic record and requires no coordination with markets whatsoever.
3. The "Civic Engagement" Argument Should Alarm the Commission, Not Reassure It (Questions 7-11)
Mr. Sawai argues that Mentions Markets produce a public benefit because they give participants financial incentives to watch Federal Reserve press conferences and congressional hearings. He presents this as evidence of public interest value under CEA section 3.
The Commission should recognize this argument as a warning, not a justification.
A financial market that pays people based on what specific public officials say during official government proceedings creates, by design, a class of participants with a direct monetary stake in the precise words those officials choose. That is not civic engagement. That is the financialization of government communication itself.
The Commission asks in question 30 what role it should assign to event contracts whose outcomes are under the control of a single individual. For Mentions Markets, that single individual is a Federal Reserve Chair, a sitting Member of Congress, a CEO of a public company, or a head of state. Mr. Sawai frames this concentration of control as a surveillance advantage. It is actually a governance crisis waiting to happen. When millions of dollars in binary contracts depend on whether Jerome Powell uses the word "patient," Jerome Powell is no longer just a monetary policymaker. He is the resolution mechanism for a gambling market. The Commission should ask whether that is a role the CEA was designed to create for the Chair of the Federal Reserve.
4. The Insider Trading Framework Mr. Sawai Cites Has Never Been Applied to This Problem (Questions 29-32)
Mr. Sawai argues that insider trading in Mentions Markets is already addressed by CEA sections 4c(a)(3) and 4c(a)(4), Regulation FD, and Rule 10b-5. He concludes that existing law is sufficient and no additional protection is needed.
The Commission should ask how many enforcement actions have ever been brought under any of these provisions for trading based on advance knowledge of a specific public official's planned word choice. The answer is zero. Not because the conduct has never occurred, but because no market has ever before created a direct financial instrument tied to that specific type of inside information.
Regulation FD was designed for a world where the material nonpublic information is a company's earnings, a merger, a product launch. It was not designed for a world where the material nonpublic information is whether the third paragraph of a prepared speech uses "resilient" instead of "strong." The precision of Mentions Markets creates an entirely new category of insider advantage — sub-word-choice-level advance knowledge — that existing enforcement frameworks have no demonstrated capacity to address. Mr. Sawai's reassurance that existing law covers it is not supported by a single precedent, because none exists.
Furthermore, the Commission's own enforcement record on prediction market insider trading does not inspire confidence. The CFTC's Division of Enforcement documented insider trading cases on Kalshi involving a political candidate trading on his own candidacy and a YouTube editor trading on advance knowledge of unpublished video content. These were relatively unsophisticated violations that were caught because they were obvious. The insider trading risk in Mentions Markets — a Fed communications staffer who knows tomorrow's prepared remarks, a CEO's speechwriter who knows which guidance language was cut — is structurally more sophisticated and orders of magnitude harder to detect. Commodity Futures Trading Commission
5. The Regulation FD Argument Backfires (Question 16)
Mr. Sawai argues at length that Regulation FD already prohibits selective disclosure of earnings call scripts, so corporate Mentions Markets are covered. This argument deserves a direct response because it is clever and wrong.
Regulation FD prohibits issuers from selectively disclosing material nonpublic information to certain market participants before making it public. It was built for a disclosure ecosystem where the material information is financial results, guidance, or significant corporate developments. It was not built for an ecosystem where the material information is a specific word in the fourth sentence of prepared remarks.
More fundamentally, Regulation FD is an SEC regime enforced by the SEC. The Commission is a different agency with different jurisdiction, different resources, and a different enforcement posture. Mr. Sawai is asking the CFTC to approve a product and then rely on the SEC to police its most significant abuse vector. That is not a regulatory framework. That is regulatory gap-filling that assumes perfect coordination between two agencies that do not share jurisdiction, do not share data systems, and have never jointly enforced a case of this type.
6. "Democratization" Is Not a Public Interest Argument When the Product Causes Harm (Questions 7-9)
Mr. Sawai argues that Mentions Markets democratize analytical activity currently available only to Bloomberg Terminal subscribers and institutional research desks. He frames this as consistent with CEA section 3's mandate to promote fair competition and responsible innovation.
I am a college student who lost $3,000 on Kalshi. I am exactly the demographic that Mentions Markets would reach if approved — young, engaged with current events, drawn to products that feel analytical rather than explicitly like gambling. I am not a Bloomberg Terminal subscriber. I am not an institutional research desk. I have no risk management framework, no position limits enforced by an employer's compliance department, and no sophisticated understanding of how a binary contract on Jerome Powell's word choice differs from a binary contract on an NFL game outcome.
Democratization of access is not the same as democratization of protection. The institutional actors Mr. Sawai cites — hedge funds, political risk consultancies, investment banks — operate within compliance frameworks that govern how they use these analytical tools. Retail participants on Kalshi have none of these protections. Extending to college students an unprotected version of something that sophisticated institutions use within heavily regulated frameworks is not democratization. It is exposure without safeguard.
7. The "Offshore Alternative" Argument Fails Here Too (Questions 6, 38)
Mr. Sawai, like his colleagues, argues that prohibiting Mentions Markets will simply push activity to offshore, unregulated venues. The Commission should apply the same analysis here as to the other Kalshi submissions: this is a pressure tactic, not a public interest argument.
The offshore argument proves too much. It would justify approving literally any financial product, no matter how harmful, provided an offshore version exists somewhere. The Commission has never accepted this argument in any other regulatory context. It should not accept it here.
Moreover, the offshore argument is particularly weak for Mentions Markets. Unlike sports betting or political event contracts — which have genuine retail demand that predates Kalshi — the retail demand for contracts on whether Jerome Powell says "patient" was substantially created by Kalshi's own marketing and product design. The Commission is not choosing between Kalshi's Mentions Markets and a thriving offshore Mentions Market ecosystem. It is choosing whether to let Kalshi create and normalize a product category that does not yet have meaningful offshore demand. Prohibition here does not push existing demand offshore. It prevents the demand from being manufactured in the first place.
8. What the Commission Should Conclude
The Commission asks throughout this ANPRM what factors should inform its public interest determination under CEA section 5c(c)(5)(C). For Mentions Markets, the factors are clear.
These contracts are readily susceptible to manipulation by a single named individual through a private conversation that leaves no detectable record — a manipulation risk profile unlike any other derivative the Commission oversees. They create direct financial incentives tied to the precise word choices of Federal Reserve officials, members of Congress, and heads of state — an incentive structure with no analogue in legitimate commodity markets and with direct implications for the integrity of official government communication. They generate a category of insider advantage — advance knowledge of specific planned vocabulary — that no existing enforcement framework has ever been applied to address. And they are being proposed by the same company that has already produced five documented insider trading violations, refused to pay winning bets on two occasions, faces criminal charges in one state and injunctions in multiple others, and built its marketing strategy around targeting college students.
Mr. Sawai's comment most clearly illustrates why Kalshi's judgment about what serves the public interest cannot be trusted. A company that responds to regulatory scrutiny by proposing new products that create financial incentives tied to the word choices of the Federal Reserve Chair is not a company that has internalized the public interest obligations that come with a DCM designation.
The Commission should decline to approve Mentions Markets. It should find that contracts whose resolution depends on the precise vocabulary of named government officials and corporate executives are contrary to the public interest under CEA section 5c(c)(5)(C) on manipulation, insider trading, and democratic integrity grounds. And it should do so in regulation — not guidance — so that the determination binds future Commissions and cannot be reversed by a single administration's regulatory posture.
