(iv) an occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or level of a commodity not described in clause (i)) that is-- (I) beyond the control of the parties to the relevant contract, agreement, or transaction; and (II) associated with a financial, commercial, or economic consequence. 7 U.S.C. § 1a(19). Clauses (i)–(iii) directly concern traditionally “financial” matters, including financial values, instruments, indices, measurements, and economic or commercial indices. The final clause, clause (iv), broadens the scope of this provision to include occurrences or contingencies outside the contracting parties’ control that are “associated with a financial, commercial, or economic consequence.” This clause is ostensibly what allows the CFTC to regulate event contracts. However, based on the statutory context of this provision, an “excluded commodity” should be interpreted narrowly and must only concern strictly “financial commodities.” In doing so, the CFTC should conclude that Sports Contracts, which involve sports events or parts thereof, are not strictly “financial” events and therefore do not constitute “excluded commodities.” To read clause (iv) broadly—so as to encompass all events that have any financial, commercial, or economic consequence, no matter how minimal or attenuated—would be in error. Doing so would permit virtually all events to be commodities covered by the CEA, 5 which is an outcome that would undermine federal statutory and regulatory schemes concerning gaming, and would raise constitutional concerns. In enacting the CEA, Congress recognized that the CEA does not “supersede or limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any State.” 7 U.S.C. § 2(a)(1)(A). At the time Congress added the statutory definition of “excluded commodity” to the CEA in 2000, several other federal statutory and regulatory schemes existed that directly concerned gaming and sports betting. For example, sports betting was prohibited in many states pursuant to the Professional and Amateur Sports Protection Act (“PAPSA”), which was only overturned in 2018. See Murphy v. NCAA , 584 U.S. 453, 460–62 (2018). Additionally, various other statues provided the general federal approach to gaming, including the Wire Act, the Illegal Gambling Business Act, the Unlawful Internet Gambling Enforcement Act, and the Indian Gaming Regulatory Act. See 18 U.S.C. §§ 1084, 1955; 31 U.S.C. § 5361 et seq. ; 25 U.S.C. § 2701 et seq. With full knowledge of these federal schemes, it would be implausible to assume Congress intended to preempt the federal approach to gaming with a single clause within the definition of “excluded commodity.” Doing so would undermine the entire structure and purpose of these laws, and, as noted above, would raise constitutional concerns regarding tribal and state regulatory authority. Thus, interpreting the CEA so as to provide broad, exclusive jurisdiction over sports betting to the CFTC would undermine robust statutory and regulatory schemes concerning sports betting, infringe upon tribal and state sovereignty, and raise constitutional concerns. As such, the CFTC should determine that Sports Contracts fall outside the bounds of the CEA and are therefore strictly governed by tribal and state gaming laws. C. In the Alternative, the CFTC Should Issue Regulations Barring Companies or Registered Exchanges from Offering Sports Contracts Otherwise Prohibited by State Law Alternatively, if the CFTC determines that it does have jurisdiction over Sports Contract—which, as established above, it does not—it should issue regulations expressly prohibiting Sports Contracts. In
5 See Statement of Commissioner Brian D. Quintenz on ErisX RSBIX NFL Contracts and Certain Event Contracts (Mar. 25, 2021) (“Since practically any event has at least a minimal financial, commercial, or economic consequence, all events are commodities.”) (accessible here).
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