Comment Text:
I write to the Commission concerning "factors, in addition to those described [in the proposed rule], that may be relevant when evaluating whether a contract, or category of contracts, is contrary to the public interest."
I am an independent trader and forecaster who is trying, so far successfully, to make a living by trading event contracts in this new and rapidly developing market space. This year I have spent a substantial effort pricing contracts on the future Federal Funds rate. As a result of my efforts, and other similarly situated traders, these contracts have been much better priced than would have otherwise been the case. These contracts have obvious and undisputed economic value, as the Federal Funds rate affects interest rates throughout the world economy and are intrinsically difficult to forecast. See here for more on how Kalshi's Federal Funds contracts beat other forms of rate forecasting: https://www.marketwatch.com/story/retail-traders-are-beating-big-firms-in-guessing-where-u-s-interest-rates-will-go-next-c05196fd.
However, I cannot stake my entirely livelihood on the outcome of individual events; if I went "all in" on one event, like the Federal Reserve's decision in June, it could cost me the ability to trade in the future and earn a livable income for myself if I make a mistake. As a result, my trading strategy requires me to manage risk by forecasting across a wide variety of event contracts, so that by being more right than wrong on average, I can earn an income. Some of these other events the Commission proposes to restrict. For example, a meaningful portion of my income as a trader comes from forecasting the President's approval rating, the outcome of court cases, and other events that the Commission might construe as "involving" a "contest" under the proposed rule. Success in these markets enables me to grow my liquidity, which I in turn deploy to better price markets related to the Federal Funds rate, inflation, employment, and other markets whose value the Commission does not in dispute.
This principle applies across event contracts as an emerging product class: markets involving contests cause liquidity and better prices to accrue to markets which have undisputed economic utility. Blanket restrictions of the type proposed will damage this liquidity and pricing mechanism for a host of markets that the Commission undoubtedly wants to protect and cultivate.
