USCA4 Appeal: 25-1892
Doc: 16
Filed: 10/15/2025
Pg: 23 of 97
contemplate that there will be a need for any supplementary regulation by the States.” Id. at 36.
Courts immediately understood the preemptive effect of those
amendments. Writing for the Second Circuit, Judge Friendly explained that
the CEA “preempts the application of state law” regarding trading on federal exchanges. Leist v. Simplot , 638 F.2d 283, 322 (2d Cir. 1980). The CFTC
likewise understood that the amendments preempted state laws deeming
futures contracts to be “illegal gambling contracts.” Kevin T. Van Wart, Preemption and the Commodity Exchange Act , 58 Chi.-Kent L. Rev. 657,
700 (1982) (quotation omitted).
The 1974 amendments did not preempt all state regulation of
derivatives trading. Section 2(a) made clear that, beyond the CFTC’s
“exclusive jurisdiction” over trading on federal exchanges, the CEA did not
“supersede or limit the jurisdiction” of “ regulatory authorities under the laws
… of any State” or “restrict [state] authorities from carrying out their duties
and responsibilities in accordance with such laws. ” 7 U.S.C. § 2(a)(1)(A). C. CEA Amendments Underscore The CFTC’s Exclusive Jurisdiction. After preempting state regulation in 1974, Congress in 1978 sought to grant states a limited role in combatting commodities fraud. Congress amended the CEA to authorize states “ to bring parens patriae actions,
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